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AN INQUIRY 



INTO 



THE LAWS WHICH REGULATE 



THK 



CIRCULATI0I!T Al^D DISTRIBUTION 



OF WEALTH. 



BY JOHK MASOIf. 




KEW YORK : 
GEORGE P. PUTNAM & CO., 321 BROADWAY. 



1856. 



Ij i ^ 



Entered according to Act of Congress, in the year 1856, by 

JOHN MASON, 

In the Clerk's Office of the District Court of the United States, for the 
Southern District of New York. 



O ]^' T E K T S 



CHAPTER I. 

General principles which govern the production of wealth, "J 

CHAPTER 11. 

The power of money in stimulating or retarding the production 

of wealth, . . ... . . 11 

CHAPTER III. 

Historical summary. Effects on the condition of society by an 
increase of the precious metals, whether from incidental or 
natural causes . . . . , .16 

CHAPTER IV. 

The natural incapacity of gold or silver^ — for exchange-*— greatly 

increased by coining ..... S6 

CHAPTER V. 

Origin of money and debt. Their effect on the social conditioa 

of man . . . . . , .35 

CHAPTER VI. 

Reduction of the weight of coin — a measure of necessity re- 
sorted to by all nations, ancient and modern. Th« relief 
only temporary ..... 46 

CHAPTER VII. 

Tke precious metals howerer abundantly produced, never ade- 
quately fulfil th« functions of money . . .53 



ri 

CHAPTER VIII. 

Effects of raising the weight of coin — political and social con- 
sequences ...... 6(^ 

CHAPTER IX. 

Distinction of money as an instrument of debt — and an instru- 
ment of exchange . . . . . .68 

CHAPTER X. 
Circulation of money regulated by determinate laws . 74 

CHAPTER XL 

The origin of notes — their advantages to commerce diminished 

by governmental interference. Progress of bank issues 91 

CHAPTER XII. 

A standard of value Its distinction from a denominator of 

value ....... 102' 

CHAPTER XIII. 

Foreign commerce — lis principles distinct from domestic trade. 

International standard of value . . . . HO 

Conclusion . . . . , , .117 



TO THOMAS OARLYLE, ESQ., 

SiK, 

The eminent services which you have rendered to the 
cause of human progress through your numerous works 
induce me to inscribe this humble testimony of respect 
to your fidelity as a historian. Whether investigating 
the events of the past— or the character of men who have 
influenced the course of history — or analyzing the pre- 
sent condition of society, the high purposes and benignity 
which direct your talents, equally inspire confidence 
and moral admiration. It is naturally the hope and de- 
sire of every well-constituted mind to witness the ame- 
lioration of those extreme distinctions of riches and 
dependence which militate against the great objects of 
civilization. Largely and earnestly has your pen been 
employed to inculcate these elevated and humanising 
sentiments. ' 

The triumphs of art — the munificence of Providence 
— scatter their limitless abundance over this fair earth, 
and invite the wisdom of man to administer them with 
equity. To the advancement, therefore, of commerce — 
the developement of the laws of finance — and the eleva- 
tion of industry — is this humble effort directed. That 
it will contribute to the elucidation of economical sci- 
ence, by demonstrating principles which have hitherto 
been resisted by eminent authorities, and rendering 
practical others which are now merely speculative, has 
been the paramount object of the writer. There is no 
subject of higher importance can engage the human un- 
derstanding, or which more deeply concerns the interests 
of men in all conditions of life. 

To you, Sir, with profound admiration of your inval- 
uable services, these sentiments are addressed 

Most respectfully by 

'the authoe. 



AjN inquiry 

IKTO THE LAWS WHICH EEGULATE THE 

CIRCULATION^ AND DISTRIBUTION 

OF WEALTH. 



CHAPTER I. 

GENERAL PlilNCIPLES WillCII &OVEKX THE PBODUCTION OF 

WEALTH. 

As man cannot exist without food, and food cannot 
be produced without labor ; it is evident that the first 
motive to human industry oi'iginates in necessity. Food 
and all other kinds of wealth multiply, however, not 
merely in proportion to the labor expended, but in much 
greater ratio — every advance in skill adding to the capa- 
bilities of production. 

The motives to exertion are thus stimulated by the 
prospects of increased reward. Abundance augments 
the means of reproduction, and no limits can be placed 
to the increase of wealth, except those which arise from 
the ignorance, folly, or crime of man. 

Every nation is therefore poor in its origin and rich in 
its maturity. The opulence of a nation is, however, no 
evidence that the individuals generally of Avhich it is 
composed participate equitably in its riches, as the dis- 
tribution of wealth has in no instance, progressively ad- 
vanced, either vx'itli the capacities of production, or the 
advantages of national development. 

In the first stage of society the office of laborer and 
capitalist is one. Nature bestows her bounties on all 
without distinction. Her spontaneous productions are 



10 

the gift of a prudent parent to lier children, enabling' 
them snccessfully to pass through life, fulfilling the 
high and inscrutable purposes of their destiny. 

Civilization appropriates the soil, and classiiies men. 
It economises both labor and capital, by numerous sub- 
divisions. This multiplies production, but complicates 
the social organization. The government of society 
necessarily becomes a science which the mass do not un- 
derstand, and v^diicli the rich, from their greater leisure, 
learn, rather to preserve their own elevation than to pro- 
mote the elevation of the community. 

Economical science in advanced civilization deter- 
mines the conditions of existence and progi'ess. Man can 
no more progress without the advantages of wealtJi than 
he can exist without air. Its acquisition stimulates his 
energies and enterprise — its possession invests him with 
a degree of independence, which no form of government 
or civil law, how ever excellent, can bestow. 

In a country governed by an absolute prince the rich 
are the advisers and administrators of authority — in a 
country governed by the general voice the affluent are 
\\\Q rulers of the common wealth. The possession of sub- 
stance not only endows its proprietors with the immuni- 
ties of power, it also enhances the value of existence, by 
conferring educational superiority and influence. These 
ao^ain open the higher paths to its attainment. 

Security is, however, only attainable through the gene- 
ral prosperity of a people. Prosperity consolidates the 
strength of government, and promotes both the enrich- 
ment and power of a connnunity. It is, therefore, of the 
most profound importance to every individual and nation, 
that wealth ought to be distributed with great equity 
amongst the various classes whose services contribute to 
its production. A monoply of the means by which 
property is acquired, or its production arrested, is a fraud 
upon industry vv^hich a wise people will prevent, and if 
they have not the wisdom, they must submit to a destiny 
of irremmediable misfortune. 

Yet, in no nation have the laws which regulate the 
equitable distribution. of wealth been understood, either 
by the people or their rulers. Both classes have suffered 
immeasurably in all ages by their mutual ignorance. 
The rich have pursued their apparent interests at the 



11 

cost of their eventual ruin. The people have devoted 
themselves to industry, when accessible, or afforded the 
means of subsistence, and when these were denied, with- 
out comprehending the cause of their distress, they have 
in the agony of their condition revolted and overthrown 
their rulers. 

Revolution generally springs from organic causes, 
wdiich are not understood, and invariably subsides in re- 
action instead of remedy. It, however, overwhelms the 
opulent with the misibrtunes of the poor. It is the 
retribution of neglect or tyranny ; but it seldom makes 
the rich more wise, or the poor less wretched. Insubor- 
dination and anarchy aggravate the causes of insecurity 
without rendering the means of redress more attain- 
able. 

Oppression arising from false principles in the economy 
of Oj nation cannot be overthrown by violence. On this 
account revolutions in old established countries, aiming 
merely at a change of authority, or the destruction of a 
class, effect a temporary distribution of property and 
power, without establishing any permanent alleviation 
of the public condition. A reorganization of society 
takes place on the same principles, in some degree modi- 
fied, to produce the same, or perhaps, worse results. 
Regal and Democratic forms of government through 
this cause have, in all ages, shared a similar fate, and 
manifested an equal instability. 



CHAP. 11. 

THE POWER OF MOXEY IX STIMULATING OR RETARDING THE 
PRODUCTION OF WEALTH. 

It is not the abstruse definition of money ^ but its office 
and functions which enforc3 the first consideration of 
rational inquiry. The sole instrument, in every civilized 
country, employed for the exchange and distribution of 
w^ealth is — money. The laws which regulate the quan- 
tity of money provided for circulation, regulate the de- 
mand for goods. Distribution and demand are equiva- 
lent terms. A manufacturer who employs workmen, 
receives the product of their labor — the workmen re- 



ceire money in exchange — the money is de-mancl for 
other proclnce. 

Labor thus creates — money distributes. Every days 
Mo/' adds to the fund of national wealth; qxuvx piece 
of money is a demand upon that fund. Demand encou - 
rages the expenditure of capital, and multiplies produc- 
tion. Accuni Illation, bj this means, is accelerated by 
expenditure — expenditure is enlarged and stimulated by 
accumulation. 

In a state of barter, these laws operate clumsily, but 
without interruption. Every increased bushel of grain 
is an additional demand for broad cloth, or other com- 
modity. Every additional yard of broad cloth produced 
is an increased demand for grain. Sup)j)ly is the means 
of demand. The one is the natural cause of the other. 

To render exchanges more convenient, every commu- 
nity has chosen some suitable commodity, such as gold 
or silver, to exchange all other commodities. Unfor- 
tunately, however, products the most compact in value, 
are the most scarce and, of course, the most inade- 
quate in quantity to exchange all others — the abundance 
of general production being unlimited. The best comi- 
modity is, therefore, the worst money. 

To excliange a ton of iron for an ou7iGe of gold, or a 
sione of wool for an ounce of silver, would be most con- 
venient, if all these commodities increased proportion- 
ately to each other. But if the useful, or rather, indis- 
pensable commodities cannot be readily and conveniently 
exchanged for the scarce and less requisite metals, loss 
ensues and arrests production. A diliiculty to vend dis- 
courages the effort to produce. Impediments to industry 
are injustice to the pr(.>ducer. This, in turn, becomes the 
source of innumerable evils to the community. The de- 
sign of society is subverted when the means to secure 
life and acquire property are inadequate, either in pro- 
vision or execution. 

An error in the organic laws of tlie least important 
of human pursuits, entails more or less mischief, but in 
economical law it involves the destruction of entire com- 
munities. Men labor but do not advance — they fabricate 
wealth but ai*e not enriched. Science develops the 
capacities to produce, but the reward of industry does 
not maximise, nor the power of empU>yment expand 



IB 

with the increase of labor. A thousand obstacles to 
the industrial progress of each individual ensue, from 
causes which are in their nature but consequences. 
When the trader does not vend he does not employ labor 
to reproduce. Tending is a conventional arrangement — 
its interruption a public Avrong. It was an act of con- 
vention between men to vend or exchauge with each 
other for their mutual enrichment. The method has de- 
feated and intercepted the 'purpose. 

Industry preceded civilization and supplied the means 
of subsistence. The civilized state, therefore, does not 
yet guarantee what a state of nature did not deny. 
Populousness being encouraged in the one case, without 
an amplitude of provision to absorb the energies of indus- 
try — while in the other it would not be extrava2:ant to 
infer that the increase of the species was restrained by 
innumerable causes within the limits of natural bounty. 
]^or does the opulence of a few indemnify justice for the 
poverty of the more numerous and indispensable mem- 
bers of the social body. 

Sheep and oxen were the earliest accumulations of 
property. Men's riches w^ere computed by the number 
they possessed. The value of all things was estimated 
by the number of sheep or oxen it required to exchange 
for them. The value of a piece of cloth was expressed 
by being worth a sheep or ten sheep, or an ox^ as we 
now would express value by saying, that a piece of cloth 
is worth a dollar, or ten dollars, or twenty, according 
to its current price. It is evident that the first thing 
used to d- nominate val--e performed the first fifice of 
nwney. The earliest denominators of value were, there- 
fore, the most abundant of all pi"oducts of value. Wluit- 
ever was fabricated by skill would be readily vended ; 
the agents to buy being so much more abundant than the 
products to be sold. 

In the progress of civilization men introduced new 
agents of exchange, which reversed this condition. Sil- 
ver and gold were substituted to denominate vcdue^ and 
to perform the functions of money. Labor enlarged in 
productiveness with the progress art, but the metallic 
agents of exchange were neither equal to the products 
to be vended, nor could labor increase these rare and 
costly metals proportionately to the increase of wealili. 



14 

Money, tlie instrument of yendiiig, was naturally scarce, 
the products of labor and the capacity to produce aug- 
mented the abundance of wealth beyond the capacity of 
the metals to exchange. Men were driven to borrow, 
when they could not vend, and debt became the means 
at once of relief and bondage. 

Sellers became invariably more numerous than buyers. 
Few, comparatively, having money, and each of thof 
limited in amount, while every one having labor or goodo 
to vend, the difficulties to acquire property or to procure 
■subsistence multiplied with the power to produce the 
one and to supply the other. Production^ from being 
the cause and means of demand, became the subject of 
an instrument, and the demand for all products offered 
for sale, was limited to the amount of Metallic Money 
held by each community. A thousand pieces of silver 
would vend only a thousand products of their worth, 
though ten or a hundred times the value was offered in 
the market. jSTo more could be vended than was deter- 
mined by the number of pieces of silver. A scarcity 
of pieces thus made a scarcity of sales. In this matter 
we are not more wise than were the Greeks and Eo 
mans, though we have witnessed their fate. 

The cpiantity of wealth produced is not, therefore, de- 
termined by the capabilities of society, but by the quan- 
tity which can be sold, and the cjuantity which can be 
sold depends upon the quantity of money there are to 
buy wnth. In a wealthy and highly civilized community 
^netallic money i^ h^Tier in its worst form. It prevents 
the exchanges which would take place in a simple state 
of traffic,- for in such a condition every commodity per- 
forms the functions of money. One connnodity buys 
another. Every one who produces goods to sell, employs 
them to buy some other kind. The buyers are always 
as niimerons as the sellers, and the number of exchanges 
equal to the products to be exchanged. Every product 
niav be used to edimate value, but no one product is 
capable of eiiwnei-at'mg and exchanging all others. A 
standard of value and an instrument of exchange are, 
therefore, as distinct in their offices as the yard of 
length is to the ^^alve of the cloth it measures. 

Xo term is perhaps more common amongst men than 
that 'money is the representative of wealth, yet the re- 



15 

verse would appear to be the fact. Whenever money 
multiplies, production rapidly increases. Whenever 
money diminishes, industry is interrupted, trade lan- 
guishes and wealth decreases. The instruments which cir- 
culate, arouse or suspend the ca23acities which produce. 
Under such conditions, wealth may certainly be said to 
represent money rather than that money represents 
wealth. A true principle is thus inverted by a false one. 

When custom, and subsequently law, conspired to 
stamp upon silver and gold — two costly and scarce pro- 
ducts — the exclusive character of Money^ every other 
value was reduced to a subjective progress equally in 
production and exchange. A scarcity or abundance of 
coin j)roduced a scarcity or abundance of every other 
commodity. The proportion between any one product 
and the aggregate of all others was neither ascertained, 
nor could the consequences be comprehended in the rude 
efforts of industry, of employing a special product as an 
instrument to circulate and re23resent all others. 

Superceding and seeking to avoid the inconvenience 
of common barter, by subsituting an exceptional com- 
modity, limited instead of facilitating aggregate circula- 
tion. Still a temporary abundance of coin in a particular 
country, has given, in all ages, an immense stimulus to 
trade. On such occasions the rajDid increase of wealth 
and extension of traffic have advanced with extraordinary 
rapidity. The seductive gains of commerce and the indul- 
gent prospects of accumulation invariably engage the 
most energetic in the prosecution of mercantile enterprise. 
Impulse instead of natural progress, has in this man- 
ner excited, throughout all history, the vital elements 
of commerce to fever and eventual decay. 

Silver and gold, being by nature inadequate to the 
wants of trade, are still further aggravated in their defi- 
ciency by the inequality of their distribution. Acci- 
dental causes have determined their course at j)eriocls 
towards certain favored cities, or to a dominant nation. 
Their accumulation at these points operating to debase 
their value, again dispersed them to be reaccumulated 
where similar circumstances occurred — to beredispersed 
when the same causes have been re^^roduced. A* scar- 
city enhances the value of all tilings^ so in the case of gold 
and silver the degree oj value rises in j^ropoi^tion to the 



1^ 



universality of tlhelr functions and their inadequacy t<y 
perform them. Fixed in price hy statute^ these metals 
operate upon aggregates and^ therefore^ the enhancement 
of their value is not a subject of perception^ hut of com- 
putation. 



CHAPTER 11. 

HISTORICAL SUMMARY. EFFECTS ON THE ©CONDITION OF SOCI- 
ETY BY AN INCREASE OF THE PRECIOUS METALS, WHETHER 
FROM INCIDENTAL OR NATURAL CAUSES, 

It liolds as a rule that gold and silver are of the gi'eat- 
est value in the jjoorest countries, and of the lowest ralue 
in the richest. Tliey are hoarded in one case, they are 
consumed for luxury in the other. Neither their value 
nor circulation is uniform. The productive energies of 
civilized nations are thus arrested and paralysed through 
a cause which operates on every element of human so- 
ciety. Any circumstance which arises to increase the 
activity of circulation calls forth at once powers of pro- 
duction which surpass all ordinary estimate. 

Hence Pericles with great wisdom appropriated for the 
embellishment of Athens, the treasures taken in the Per- 
sian war. This remarkable statesman, it would seem, 
had observed that the enlarged circulation of coin en- 
riched the Athenians in a far greater degree than it 
diminished the indolent treasures of the state. The ap- 
parent extravagance, in the erection of temples and 
works of art, was compensated manifold by the stimu- 
lus given to industrial activity, and the great increase of 
wealth consequent. How much so bold, and beneficial 
a measure contributed to his influence over the furious 
Greek democracy cannot be estimated at this remote 
period. He held the reins of government for forty years 
amid all the tumults of faction. We may judge, how- 
ever, to what extent he estimated his influence over the 
minds of his countr)'nien, from the circumstance tliat he 
restored to his administration the most powerful of his an- 
tagonists who, having failed in their opposition, had been, 
according to custom, ostracised, and driven into exile. 

He was exposed to a continual impeachment of wast- 



17 

ing the public treasures. And though this was designed 
to tell upon the vulgar prejudices of the multitude, the 
prosperity and good sense of the populace sustained his 
policy through every emergency. When the large cir- 
culation of coin produced by the sagacity of Pericles, 
had again dispersed itself, the industry of Athens lan- 
guished and debt multiplied, while the declension of 
public spirit, with the corruption of her statesmen, 
paved the way to her ultimate subjection. 

Nor had even the extraordinary measures of Solon, 
though executed upwards of a hundred years anterior, 
been capable of preventing the return of that condition 
of social oppression which the intervention of a lalse 
principle in economical law continued to inflict. It 
did not, however, escape the observation of Solon, that 
the great source of oppression amongst the Athenians 
was ascribable to some false principle in the nature of 
money. He was the first statesman of antiquity who re- 
duced the weight of coin, to mitigate the evils it imposed 
on the social condition of the people. 

During the latter part of the Roman republic the ex- 
tortions of the Roman Conquerors gave an immense 
monopoly of gold and silver to the city of Rome. 
Augustus Caesar added to the spoils of his predecessors 
the enormous treasures which had been accumulated by 
the Ptolemies for state purposes. The increase of money 
was so great in Rome during his reign, that the rate of 
interest, which had never been lower than one jper cent 
per month, sunk to four per cent per annum. Thirty- 
four per cent had been common amongst both Greeks 
and Romans. Those who prosecuted industry would, at 
the time of Augustus, be enabled honorably to cancel 
their debts, instead of by revolutionary decree — a mea- 
sure of necessity often resorted to by the Romans. 

The oppression of private debts, which had multiplied 
with the progress of population, during the republic, 
prepared the Romans for any master which would pro- 
vide them with bread. All provisions of a state to 
meet social exigencies are of doubtful policy, and in- 
variably accompanied with great abuses. When indus- 
try does not find employment to secure doth subsistence 
and the means of accumulation, the donations of the 
state neither remedy nor compensate for the wrongs 

G 



IS 

inflicted. Labor being the source of wealth, and the 
foundation of the civilized condition, whether it is the 
property and pursuit of the individual, or the property 
of a master in the persons of slaves, the community suft- 
ers loss in proportion to the interruption of its exertions. 

The safety of a community depends upon two special 
circumstances — first, the means of amply providing for 
its defence, and secondly, by so developing the pursuits 
of labor and enlarging the channels of enterprise, that 
profitable employment will engage the entire energies of 
the multitude and command respect and submission to 
authority. Government is responsible for the insecurity 
of the commonwealth wdien it interposes and obstructs 
by statutory law, the measures w^hich men would devise 
to advance their social condition. 

The difficulty to obtain honorable employment occa- 
sions both defection and the decline of martial spirit 
amongst a people. 350,000 Roman citizens were de- 
pendent on the state for subsistence when the first Csesar 
ascended to power. !Nor did the severity of his domes- 
tic policy, or the propitious circumstances which attend- 
ed the reign of his grand-nephew and successor, Augus- 
tus, ever reduce this number below 200,000. Yet the 
allowance given was not equal to that supplied to the 
slaves of private citizens. Keither the repeated divi- 
sion of the lands, nor the decrees canceling their debts, 
were permanent or salutary. Augustus had even to 
employ force to raise troops for the defence of the em- 
pire, when its safety was threatened by the Gauls, though 
the pay of a soldier had been advanced three times the 
amount paid during the republic. Gibbon and other 
eminent writers erroneously ascribe the fall of the Ro- 
man empire to the vice of Inxury, while a state of de- 
pendency and destitution, periodically threatened, not 
merely the auti:iority of government, but the entire in- 
stitutions of property. 

A people who had thus achieved the mastery of the 
civilized world, found themselves the, slaves of an inex- 
orable condition of domestic suffering, from, a cause 
which they could not comprehend, and wdiich seemed 
to be ao'crravated bv the greatness of their destinv, and 
the expansion of their power. Augustus, however, con- 
tributed much to stimulate industry by the great in- 



19 

ereaso of money whicli his spoils added to c"rcnlation. 
Bat he could not invoke military ardor, nor inspire 
lieroism amongst the humble and more numerous cit'zens 
whose spirit had won, during the republic, all that was 
now possessed by the empire. Yenerable soldiers were 
ignominiously beaten and degraded in public by their 
creditors, j^either official distinction nor srrvices in ac- 
tion shielded the dignity of their persons or held them, 
inviolable against the relentless penalties of debt, though 
contracted in their industrial pursuits during retirement. 

The temporary enlargement of circulation exhibited 
the vast energies and skill of the Eoman people 
to supply at once their natural and refined wants, and 
to multiply the resources of the commonwealth. It is 
said that Kome, during the reign of Augustus, was 
changed trom rude edifices of brick, to a city of coUosal 
grandeur, exeented in the costliest marble. In a short 
period the interest of money again rose, indicating that 
absorption in high prices, and dispersement were restor- 
ing it to the provinces from whence it had been drawn 
by the extortions of conquest, tlius reducing the capital 
to the former depressed condition of trade and dimi- 
nution of employment. Amelioration was impossible. 
The dissolution of a power impregnable to arms and 
the declension of institutions which no resistance could 
destroy became inevitable Barbarism eventually tri- 
umphed on the ruins of civilization, as the authority of 
civilization had triumphed on the ruins ot industry and 
personal freedom. 

Amid the chaos of civilization arbitrary power be- 
came necessary to the preservation of legal authority. 
Constitutional provisions w^ere unequal to the exigencies 
of the state. Extreme wealth and poverty were incom- 
patible with civil tranquility, the more especially when 
the unwieldy populousness of the capital and its insur- 
rectionary history suggested so many well grounded 
apprehensions. The possession of riches strengthens 
the desire for security, while the privations of depend- 
ence, augmented by numbers, aggravate the spirit of 
insubordination. And though no one is more desirous 
of ireedom than he who enjoys property, yet it is the 
nature of man to relinquish many civil immunities, to 
live less exposed to alarm, and commanding greater 



20 

safety. The experiment of republican freedom was 
abandoned after five hundred years, and with it, for a 
time, the faith of men in the progress of humanity. 

At this conjuncture, the advent of the disciples and 
converts to Christianity interposed to change the current 
of events. They proclaimed a new code of moral and. 
economical doctrines, which were as attractive to the 
multitude as they were alarming to authority and to the 
interests of the opulent. Property was declared a con- 
ditional gift which Providence had bestowed on the 
rich for the benefit of the poor. Tlie civil law was, 
therefore, held to be subversive of the divine law, where- 
ever private right intervened antecedent to the wants of 
the Becessitous. All things were to be held in common. 
The rich were assured of future felicity as the condi- 
tions of conversion and the righteous administration of 
their substance. ISTon-belief was denounced, and penal- 
ties invoked from a scource where human favor and 
authority were impotent. 

Privation and want rendered these doctrines accept- 
able to the poor, while numbers of the rich, in an age of 
such superstition, trembled at their anathemas, and relin- 
quished their riches. Persecution also propagated 
their views — excited sympathy for their sufierings, and 
commanded admiration for their heroic martyrdom. 
As conversion extended, these doctrines were modified. 
The paralyzed empire reclined upon the lusty shoulders 
of the Christian Pontificate — sl sovereignity which pro- 
claimed its sceptre the emblem of immaculate favor and 
authority. Charity became the agent of profitless dis- 
tribution. It substituted the agency of money. The 
destitute were fed at the cost of private and public 
means, without equivalent industry to add to the general 
stock. The reluctant donations of the rich replaced the 
reluctant donations of the state, and augmented the 
treasures of the churcli. Debasement of sentiment be- 
came cemented to debasement of condition. Submission 
and tranquility were restored with indolence and depen- 
dency, until the advent of Columbus and Luther. 

After the establishment of Christianity, the contribu- 
tion of money from Christendom to the ecclesiastical 
government threw an amount of circulation into the 
lap of Italy, wliich, conducing to the revival of 



21 

trade, gave rise to the medieval republics. So many com- 
mercial cities could not have arisen into trading activity 
without a special cause of this nature. 'J heir traflSc 
gradually extended and re-opened the commerce with 
India, which had been closed for centuries. Their 
prosperity was on this account, to some extent, pro- 
longed, but decay was not less inevitable. 

Saving acquired more than their fair share of the 
precious metals, prices would rise proportionately. 
Wages profits, and the value of property being so much 
higher than in other European communities, the metals 
would naturally flow to make purchases were commodi- 
ties were cheapest. Manufacturing industry would suffer 
the first shocks of decline. The cost of living in Venice, 
Lombardy, Genoa, and the other Italian republics would 
prevent a reduction of wages commensurate to the preser- 
vation of their trade. While the vast riches of the suc- 
cessful merchants would demand the most costly indul- 
gences, which all countries could produce. Thrift and 
accumulation would be left to a second, third, or fourth 
succession of traders. The first and second living in 
opulent extravagance — would distribute in their expen- 
diture, not only the gold and silver they had gained by 
their own adventures, but also the revenues they would 
derive out of the industry of their successors. The con- 
dition of these states at this moment exhibit how com- 
pletely their commercial ruin has been effected, not- 
withstanding their great resources. 

During the reign of Elizabeth, England received so 
large an increase of gold and silver from the great pro- 
duction of these metals consequent upon the discovery 
of America, that the average price of grain rose nearly 
six-fold. The general increase of wealth stimulated by 
such additions to the current money, has given to the 
reign of this princess a degree of historical importance 
seldom accorded to a sovereign. Simultaneously com- 
merce sprung into activity throughout Europe by this 
sudden increase of Money. A few millions sterling of 
gold and silver, added hundreds of millions sterling to 
the annual productiveness of nations. While the in- 
crease of the precious metals continued in some degree 
to augment with the vast multiplication of commodilties, 
the progress of industry opened its innumerable resour- 



99 



ces to supply the wants of man. The conventional law 
of civilized nations having bound down the operations 
of exchange to the use of gold and silver, industry and 
enterprise await the accidental supply of their product, 
and multitudes languish in misery because these inade- 
quate and excejptionahle metals bear alone the stamp of 
authority and the blind approval of tradition. 

It was even argued by the eminent Mr. Hume, at the 
close of the last century, that a greater or less circulation 
of money did not affect the increase ot national wealth. 
Yet he concluded correctly that the increase of coin only 
benefited trade and industry in the transition from a 
lesser to a greater quantity thrown into circulation. It 
is, however, remarkable that so acute an observer did not 
perceive that transition is a law of inverse progress and 
that the accidental and excessive increase, instead of the 
increase itself occasioned a rise of prices. That when 
money augments from a stationary minimum to a sta- 
tionary maximum, the law" of progress ceases. A scarc- 
ity of money and an excess of commodities are, there- 
fore, inseparable and incident to both conditions. Modern 
statesmen and princes have been guided by this and 
similar economical writers, without augmenting their 
claims to popular respect, or securing their authority 
against the discontent of their unfortunate subjects. 
Bankruptcy and pauperism have not diminished. While 
the rude sentiments of the multitude are left to enforce 
those changes which baffle the foresight of the most 
distinguished legislators and economists 

The mines of the l^ew World had no sooner reached 
their maximum yield than depression returned. Trade 
and employment declined in England so much during the 
reign of Elizabeth's successor as to occasion great solici- 
tude. The celebrated Raleigh, at the close of the 16th cen- 
tury, argued forcibly the necessity of reducing the weight 
of coin to revive trade, which was greatly depressed, and 
to improve the condition of the people, who were in great 
want of employment. Yet gold and silver were depre- 
ciating at the time. Aggregate production bears such 
vast and incomputable proportions to any one or two 
products, but especially to the limited product of gold 
and silver, that men, not comprehending these unfitted 
relations, continue to suffer great wrong, with loss of 



property and inconvenience in business, from one gene- 
ration to another. 

Trade was, probably, worse on the continent of En- 
rope. High prices were occasioned by the abundance 
of the metals, and as commodities increased both in 
quantity and price, money was absorbed beyond the 
limits of its supply. Money became scarce because 
commodities became abundant. An over-production of 
goods was the index of an nnder-production of metal. 
Every branch of industry ceased to be profitable from the 
greater capacity of productiveness, while the oppression 
of the community increased in a great degree with the 
power to supply amply every requirement. A confusion 
of results produced a confusion of ideas. Over-trading 
and over-production were to be restrained, the one with 
prudence, and the other by curtailing employment. 
The merchant could not comjDrehend an advice which 
arrested his enterprise, and the manufacturer did not 
understand how his capital or interest could be promoted 
by the non-employment of labor. 

1^0 desire can be more reasonable or more honorable 
than the acquirement of wealth in the pursuits of trade. 
It is impossible and impolitic to restrain the spirit of 
enterprise. JN^or would it modify the evil of financial 
difficulties. Commercial prudence cannot remedy the 
violation of organic laws. Every man engaged in trade, 
therefore, pursues the course suggested by his own judg- 
ment, and though the great majority of traders never 
attain the means of retiring in independence, the num- 
bers who do, are probably, much greater than if they 
were to adopt the dangerous maxims of modern philosophy. 

Upon the discovery of gold in California, we have 
within a few years witnessed the extraordinary impetus 
given to trade. Civilization in Europe had divided so- 
ciety into two classes, the one who obtained revenues 
from property, and the other who had neither property 
nor the security of employment. Every branch of trade 
had approached a crisis. Peace, science, and the in- 
crease of population had multiplied all the agencies of 
production, yet the condition of the people had become 
worse. Tlie consumption of commodities in Great Brit- 
ain which bore taxes had declined, though the population 
liad augmented. Public revenue liad to be raised thi-onc;]'! 



2i 

a tax on income, as well as by tax on articles of general 
consumption. France was not less oppressed. 

Amid tlie nniversal clamor tlie ablest statesmen stood 
overwhelmed. 'No exj^lanation was given. A war tax 
after a long and profound peace was the popular excla- 
mation. There was an anomaly which no one apj)eared 
to solve. The industrial energies of nations were cir- 
cumscribed by a cause which seemed inscrutable. No 
commodity could cancel debts^ or exchange the products 
of labor^ but gold or silver. The product of gold and 
silver was declining, while the population and produc- 
tive powers of labor were augmenting. Ten millions 
sterling annually at the close of the last century had de- 
clined, in 1848, to less thsnjlve millions sterling annually. 
Tlie law of general progress was arrested with the law 
of retrogression in the product of gold. Respect to 
authority relaxed with the insecurity of existence. The 
material economy could not expand. ISTeither capital 
nor labor could find adequate employment. 

Goods could not be sold, and labor could not be em- 
ployed. What could not be vended did not call forth 
labor to replace them. Competition was even paralyzed 
by the intensity of the causes which produced it. It 
was prostrating enterprise instead of encouraging it. 
l¥ages and profits could not descend lower. Money ^ the 
indispensable instrument of commerce, did not increase, 
and that which already existed would not circulate. 
Without its proportionate increase men could not vend 
what was produced, much less what could be produced. 

Popular ignorance ascribed this condition of things to 
their rulers. A struggle was impending, it was for ex- 
istence. Revolution, incipient in Britain, broke out in 
France, and advanced against authority, only to augment 
tlie evils it sought to remedy, and to multij)ly the priva- 
tions it contemplated to redress. 

Europe entered a crisis, the termination of which no 
man could foretell — to produce consequences which no 
mind could estimate. Previous revolutions had swept 
down all traditional rights. The lands had been divided 
and sub-divided by experimental legislation, till pro- 
prietors were rendered poorer than peasants, and agri- 
cultural wealth could be no further abridged. What 
was to be the next measure in the work of anarch v ? 



i;o 



Property was declared robbery. Projects were devised 
wliicli would have added public demoralization to social 
ruin. ]^o sclieme was too extravagant — no visionary too 
wild. Exhaustion and chaos, or nltimate despotism was 
inevitable. The latter trimiiphed. The first instrnment 
of ]30wer would have been the first victim to an office 
created by the irresistible force of circnmstances, and 
which conld not be abrogated withont the extinction of 
every form of security to the life of the poor and the 
property of society — but a great event in human history 
suddenly interposed to restore men to the pursuits of 
civilization and to a condition of order. Employment 
diverted the attention of the multitude from contention 
with authority, to the procurement of bread. 

The discovery of gold in California in vast abundance, 
rapidly supplied that essential element to trade, the 
deficiency of which had produced so universal a spirit of 
insubordination in all classes. It is probable that no 
additions had been made to the current coin of nations 
for many years. The records of the mints threw no light 
on this subject. They were but the channels of transi- 
tion. How much coin was annually re-melted and con- 
verted into manufactures could not be ascertained. Ac- 
cording to the best authorities twenty millions sterling is 
the amiual gold product of California and Australia, 
which, taken together with the old product will give 
about twenty-five millions sterling. The free and rapid 
intercourse between civilized countries have diffused 
equably these additions of the precious metals, affording 
no precedence in their use such as occurred with Sj)ain 
when she usurped the treasures of the new v/orld. In- 
dustrial enterprise, therefore, enjoys in every nation their 
common immunity. 

The immediate effect of tiiis new and advancing in- 
crease to the stock of coin has not only extended the field 
of employment throughout civilization, but it has added 
an immense increase to the accumulations of wealth, and 
to the productive resources of every trading community. 
To the operative class it has enlarged the guarantees of 
subsistence, though it does not and cannot raise them to 
a condition of affluence. Labor is the most essential 
and imperishable of all property, and its capacities so 
different in their nature from every kind of chattel posses- 

D 



26 

sion, that no just equivalent of its value can take place 
while ffold or silver are the les-al instruments enforced to 
Imiit tlie operations of exchange. For in limiting ex- 
change it circumscribes the energies of productive in- 
dustry, and obstructs the enterprise of capital, thus 
diminishing the resources of the nation, and the com- 
pensation of its members. 



CHxlP. IT. 

THE NATUEAL rCs'CAPACITT OF GOLD AND SILVEK ^FOR EX- 

CHAi^GE GEEATLT IIs^CEEASED BY COEs^ING. 

It was no doubt considered a great improvement upon 
common barter, when one product was selected as an in- 
strument to exchange all others. Bars of copper being 
less bulky than most other articles of value, were used 
by the early Romans. On the authority of Pliny there 
was no coinage amongst this people till the reign of See- 
vrus TuLLnjs. Copper was then coined, but not sih^er till 
the fifth century after the building of Rome. The difficulty 
to exchange, in suitable quantities, one commodity for 
another, in the earliest stages of civilization, would 
naturally suggest the instrumentality of metal, on ac- 
count of its compact and universal value. Silver was 
probably possessed in very small quantities, and gold in 
still less, if p.t all, by primitive communities. 

Copper, silver and gold have been successively em- 
ployed for money by all nations, as they have advanced 
in industry and population. These metals suggest to 
the mind qualities which seem to fit them for this impor- 
tant purpose. Tlie Mina of silver was used by the GreekS;^ 
the Shekel by the Hebrews, the As by the Romans, and the 
Tcdent was common to all. Apart from their character 
as money the precious metals were for many reasons es- 
teemed by the ancients as the most valuable of all pos- 
sessions. That condition of insecurity ever attendant 
upon early civilization, must have enhanced the estimate 
of their importance, amid the mutations of life, their re- 
moval or concealment being so much more convenient 
than any other sj)ecies of property. Besides they are 
indestructible. 



:^^ 



There is also an ap]3arent certainty in buying and sell- 
ing when one obtains in exchange an article of e-cjnal 
worth, and capable of re-exchanging for the valne given 
to possess it. All these considerations hai^e combined 
to render metallic money favorable in the opinions of 
mankind. The precious metals as histruinents of ex- 
change are, therefore, held now, not less than at the 
most antiquated periods of history — in equally high esti- 
mation by the most learned and the vulgar. J^o econo- 
mical writer of eminence seems to have overcome this 
common and undisturbed prejudice. K^ecessity has, how- 
ever, superseded philosophy in this instance, as in many 
others, and every civilized nation has added a denom- 
inative currency of Paper to its Metallic circulation. 

Gold and silver are produced like all other commodi- 
ties, for consumption. Whatever is taken from this 
natural purpose and converted to coin is subsequently 
remelted and reclaimed to mauufactures. Gold and sil- 
versmiths, jewelers, goldbeaters, and many other crafts- 
men use coin as readily as ingots or bars of the precious 
metals. Coin being the same price as bullion while its 
standard and assay are warranted, there are some trades 
who prefer and use nothing else. The melting-pot thus 
restores these costly minerals to their proper destination. 
That portion which is left in circulation is like the 
last vessel of water in the well, which cannot be drawn 
forth by oppressed pride or vanity because of the en- 
feeblement and exhaustion of private means. 

It may be urged with great force of argument, that 
double or treble the total annual product of the precious 
metals would not supply even the moderate consumption 
of jewelry and plate, but for the general poverty occa- 
sioned by their scarcity for commercial purposes, and 
the limits which such poverty places to the incomes of 
the middle and operative classes, both of which would 
otherwise possess proportionately greater means to 
gratify the refinements of taste. 

I^or are there any products so subject to be accumu- 
lated and monopolized as gold and silver. Being less 
abundant than all others, they are still less capable of dif- 
fusion. The least necessary of manufactures, they are how- 
ever, the most profitable. They accumulate in immense 
stocks with the least difficulty, and are preserved with the 



28 

least sacrifice. Produced to gratify tlie most frivolous 
passions, and consumed by the most opulent, they are 
withdrawn by the goldsmiths from circulation at the 
lowest price, though the sternest necessities of nature, 
and the most imperative demands of industry are left 
unanswered. Ministering to the luxury of the rich at 
the highest cost, they minister only to trade at the most 
oppressive rates of usury. ]^or can the consumption of 
jewelry said plate ever diminish, unless the incomes of 
the wealthy are diminished, and no diminution of their 
private revenues can take place until the condition of the 
industrious, from whom they draw their resources, is so 
wretched as to render the progress of a community im- 
possible, and its decline inevitable. 

'No legislative provision can, therefore, preserve for the 
accommodation of exchange^ what is more profitably em- 
ployed in manufactures. Yet all nations have at one 
time or other enacted severe penalties against the melt- 
ing of coin, or conveying it out of their respective coun- 
tries. An ounce of ma.aiifactured gold or silver sells for 
three times its zoeigAt in coin. Three, four or five times 
the price of the coin is realized, according to the work- 
manship. It is to be presumed that there was no more 
difliculty for the medieval knights-errantry or ladies of 
degree procuring spurs or bracelets of gold during the 
most rigid execution of the laws against melting of the 
king's coin, than at present. Crowns of gold, torques and 
chains were lavished on the Roman soldiery, when coin 
commanded from thirty to forty per cent of usury. Con- 
sumption and circulation thus conflict with most unequal 
force. 

A rich man can afi'ord to give fifty bushels of grain for 
an ounce of jewelry, or three bushels of grain for an 
ounce of silver plate, as mere ornament, when the entire 
industrial community would find it ruin to exchange 
more than one bushel of grain, or its equivalent in man- 
ufactures, for an ounce of silver. An ounce of silver 
coin represents so much outlay and so much profit. The 
less silver the producer obtains, the less profit he realizes. 
A rich man, on the contrary, the more he pays for an 
ounce of silver or gold, the higher is the gratification, 
as in such a case it must contain, besides the costliest 
material, a greater and costlier expenditure of labor. 



29 

It is from the amplitude of means that sentiments of 
pride are indulged. Those who buy gold and silver-plate 
purchase at the highest price they can afiord, for the 
sake of disphiy. The producers have just the opposite 
motive and interest, as the less quantity of gold or sil- 
ver they obtain in exchange for their products the less 
justly are they compensated. The competition arises 
altogether from ditferent motives, and by no means for 
equivalent purposes. 

I^ot more than one part out of eight of the precious 
metals is added to the current coin of nations. Such is 
the estimate of the ablest authorities, and it must be ad- 
mitted that the data is vague and the proportion very 
doubtful upon v/hich the opinion is formed. Taking the 
total product for 200 years preceding 1800, at six onil- 
lions sterling per annum, this would allow one hundred 
and fifty millions sterling for circulation. Yet the total 
currency of gold and silver in Great Britain did not ex- 
ceed thirty millions according to the estimates drawni 
at that period. If double this amount w^as held by otlier 
countries, say sixty m^illions sterling, a total of only 
ninety millions sterling would be the whole. The allow- 
ance here made is, probably, much too favorable, w^hile 
the annual product, according to Jacobs, was not less 
than ten millions sterling at the close of the last century. 
One out of thirteen, or probably fifteen is a more ac- 
curate calculation. 

Statutory law having fixed the weight of gold and 
silver required to cancel debt, has actually fixed the 
weight which men must obtain in exchange for produce. 
To sell for less than a determinate weight or price, for 
these terms are the same, is to sell without profit, since 
rents, taxes, and other charges on production, exact a 
determinate weight of money out of the returns of 
every man. Law has substituted weight for value. A 
scarcity of gold and silver does not, therefore, raise their 
price, as in the case of all other products, free from stat- 
utory action. They are often depressed in value when 
they would naturally ascend, and raised when they 
would naturally cheapen. Tlieir relation to debt is cer- 
tain and determinate — their relation to all the products 
of industry is irregular and indeterminate. They fulfil 
to the rich the absolute conditions of contract — thev 



violate to the struggling tradesman the essential condi- 
tions of justice, feiiiiicient weight of gold or silver can- 
not freqiientlj be obtained in exchange — yet the full 
weight mnst be paid under legal compnlsion, in the can- 
celment of all debts. 

A special office throngh these means is imposed on 
gold and silver by the state, over and above the natnral 
purposes of production, while the law in fixing their 
price, exceptionally debases their value and arrests their 
increase. Productive economy is thus interrupted by 
the intervention of authority, The increase, therefore, 
is specially retarded of those certain commodities which 
law has decreed the most essential of all, by rendering 
them the instruments of justice^ the agents of industry, 
and the functionaries of human progress. 

If there was no interposition to affect their value, 
eTiery addition to the current price would stimulate the 
supply. Mines would yield up their treasures when 
compensating prices were realized, which could not be 
previously worked. The power of the metals would be 
enlarged. Their instrumentality as money would be 
improved. Both their quantity and value would be aug- 
mented relatively to general production. Metallic money 
would hecome a subject^ as well as an instrume7it of 
commercial economy. 

The means of trade to employ costly metals for its 
operations would be greater than the means of individ- 
uals to employ them for luxury. This would reserve 
for the purposes of industry a determinate proportion 
by discouraging their consumption with the increase of 
cost. Their value would be more uniform relatively, 
and more advantageous in highly commercial countries 
since they would command the greatest value where 
they were the most requisite, and where they absorbed 
the greatest quantity of products in exchange. 

All accumulated property in the civilized condition is 
a debt borne by productive industry. The margin be- 
betvreen the price of products and the incomes drawn 
from the producer, determines the reward of labor and 
the encouragement to enterprise. In fixing the price of 
gold, the law guarantees the claims of the creditors, 
while it prevents industry from fulfilling its contracts. 
Credit, wliich ought to be the handmaid of enterprise, 



31 

becomes its oppressor, since there is no adjusting power 
to guard the thrifty accumulators against tlie ruinons 
demands of the fortunate who have accnmnlated. 

It cannot be doubted that the Y/aste of labor and 
capital occasioned by rude barter would be materially 
economized by the use of bars of metals, in suitable 
weights, and so long as governments did not interfere to 
coin the metals, no serious injury or injustice amongst 
the exchangers would result. Debts arising from mutual 
traihc and reciprocal accommodation would be contracted 
upon such terms as experience judged the most suitable. 
Had no interference of law disturbed the natural value 
of any commodity — imposed conditions, or inflicted pen- 
alties — men's wits would have devised remedies for any 
defect in the methods of trading, which, in the hands of 
government, have become the source of incalculable 
wrong and national calamity. 

The claims on industry would, there can be little rea- 
son to doubt, have been regulated by competent adjust- 
ers, whose business it would be to preserve a record, 
and determine the market value of the metals. When 
the metals were scarce, a less quantity would vend an 
equal or greater quantity of produce, and cancel an 
equivalent portion of debt. When they were in greater 
plenty, vending would not be afiected, exchanges would 
adjust themselves with the quantity of metals and pro- 
ducts. Averages of jj^vice would detev'mine the equity of 
obligations. 

The rent of land in England and Scotland was former- 
ly paid upon this principle. Whatever was the price 
realized for grain on three or four market days at differ- 
ent periods of the year was averaged, and the amount 
so determined was paid. When rent was paid in this 
manner it was called Con'cersion Price. Such contracts 
were not only just, but they undoubtedly economized 
the valuable labor of the farmer, who would be enabled 
to sell when otherwise he must frequently have returned 
from market v/ithout success or profit And though 
coin was the instrument of liquidating the obligations 
between tenant 2,"^^ ])ro])Tietor^ it was not employed as a 
legal agent but in its true character, as a subject of com- 
merce. 

The individual, and ultimately national ruin, which 



32 

has resulted from tlie use of metallic money never would 
have occurred had the governments of communities not 
interfered and coined the metals. Making and regulat- 
ing money is strictly a function of trade, and, therefore, 
a usurpation of the state. Had the metals remained 
uncoined, the weight and assay of each piece being 
simply alBxed by the traders, not by authority, and 
valued by the exchangers in their dealings, the incon- 
venience thus arising would have been the only loss sus- 
tained. The worth of the metal and not its weight 
would have prevailed — since the law of value^ not the 
law of gramty^ can alone cancel with justice and equity, 
the claims of debt. 

Xor was the evil less that the first coinages of all na- 
tions bore the inscription of their weight. The edges of 
ancient coins as well as their obverses, were stamped, pro- 
bably to guarantee their current use without the trouble 
of weighing. Princes would, however, soon observe 
that the wear of the coin did not reduce its current value. 
On the contrary, the increase of commodities without a 
corresponding increase of coin must have in most in- 
stances, raised its value. A greater amount of product 
would be obtained for the lighter coins. The weight 
being reduced from constant use, while the current value 
rose, would be a problem of some difficulty in the crude 
condition of finance in early civilization. This, no 
doubt, suggested to crafty princes the first idea of alloy- 
ing and clipping the coin. Gold suffers from abrasion 
a loss of one per cent in six years ; silver one per cent 
in two years. 

The distinction between i(?^'2^/iz^ and '^(2?'^^ in the nature 
of money seems to have excited the consideration of the 
profound Locke. He proposed the revival of stamping 
the weight on the gold coins. Though such an advice 
had been adopted by the British government, it would 
not have served in any degree to modify its injurious 
action on commerce, of which, there can be no doubt, 
he was cognizant. Whenever weight superseded value, 
the real character of the metals was set aside and a 
legal capacity substituted. Though the scarcity of coin 
caused by the scarcity of supply, or the increased con- 
sumption of the metals rendered them naturally more 
valuable, the quantit^^ of weight necessary to discharge 



S8 

debt would not be relinquished by the creditor, and the 
debtor could not, therefore, vend his produce witli- 
out the obtainraent of the quantity of weight, wliich 
would compensate outlay, besides transferring the weight 
contracted to be paid. If one of silver wonld exchange 
for a hundred times its weight, on average of general 
produce, the amount which could be exchanged would 
be determined by this relation. If the products to be 
vended, either in a particular market or aggregately, 
amongst a community exceeded these proportions, then 
all in excess would remain unsold. Two alternatives 
would alone remain, either tlie excess must be sold on 
credit, or the whole be debased in value. If the quan- 
tity of products were increased, or the silver decreased — 
so that the proportions became one hundred and fifty 
of produce to one of silver — then the value ot money 
must rise one-third^ or the current price of products sink 
in this degree, or the vendition be less than aujyply one- 
third. These results follow as definitely as the law of 
geometrical ratios. 

The British pound sterling was current at fifty-four 
pennyweights of silver, for twenty years preceding 1817. 
All obligations of dcM^ public and private, all d^enomi- 
nations of value, whether of estate or exchangeable 
products averaged this standard. It was raised by statute 
to eighty penny weig fits. This unwarrantable act of par- 
liament, reducing the enumerative capacity of silver and 
gold, continued to reduce the enumerative price current 
of all merchandise and products for upwards of thirty 
yeai'S after the alteration. Three jpennyweights and eight 
grains of gold in the current pound sterling, was raised 
to fioe pennyweights and three grains of legal liability. 
The standa)cl weight of money heing raised one-third, 
the price of all juoducts was reduced at least one-half 
Many products sunk two-thirds in price current. The 
current liabilities, public and private, of the nation, 
were by that extraordinary measure doubled — probal)ly 
augmented three-fold. A tradition was restoied — at the 
co>t of general ruin and confiscation. 

The great abundance of gold from the recent disc(')V' 

eries began to opej-ate against this law and to arrest its 

action ahout ls50. Since that period prices have risen 

in a considerable degree, thus reversing the progress of 

s 



decline, while the additional and numerical increase of 
coin lias mnltiplied the number of exchanges to so great 
an extent, that the production of wealth in Britain 
cannot have augmented less than one hundred mil- 
lions sterling annually. Public liabilities have declined 
in the exact proportion of the rise of price. 

Gold and silver are required as enumerators as well as 
€sti?natoTS of value. But in neither character are they 
capable of performing the progressive work of commer- 
cial enumeration or sustaining equivalency. They cannot 
multiply correspondingly with production, and therefore, 
the energies of men are limited or arrested, so that they 
may have time for the continual arrearages in this over- 
work of their powers. If, however, gold should increase 
for a time so largely as to accommodate the require- 
ments of trade, it invariably depreciates. As it sinks 
in value, it diminishes in capacity. Its relative and pro- 
portional value recedes with its greater supply. An 
abundance of gold does not, therefore, produce an 
abundance of money, or mitigate its scarcity. Its tem- 
porary increase causes depreciation, and depreciation 
ultimately limits its production. It thus debases its own 
value, and arrests its production by that debasement. 

The quantity of supply of every commodity is the 
universal law of value. Every community, therefore, 
suffering from a natural deficiency of the precious metals 
for industrial purposes, absorb them alternately from 
each other, and disturb the equability of their respective 
proportions. The nation from whence they are with- 
drawn instantly finds its commerce reduced to stagna- 
tion, and the equity of every obligation violated, conse- 
quent upon the current value of money having risen in 
exchange, without any adjusting provision in the current 
and hourly maturing debt inseparable from commercial 
enterprise. Wherever these metals accumulate, a fe- 
verous activity is at once excited, and industrial pros- 
tration, occasioned in one nation by their scarcity, is 
produced in another by their excess. 0?i this account 
the value of these metals is less eq%iahle than any other 
products. A ton of bar iron will sell at one time for four 
ounces of gold, (sixteen pounds sterling,) at another 
for two ounces of gold, (eight pounds sterling) — no de- 
ficiency in the supply of iron, nor alteration in the w^ants 



35 

of the community may have taken place. It is, there- 
fore^ demonstrable that the value of money, and not ttie 
value of the commodity is disturbed by these extremes. 

A measure of weight is as distinct in its nature from a 
7neasure of value and enumeration as an element is dis- 
tinct from a substance. Lowering or raising the weight 
of money does not on this account ever operate in the 
same degree relatively to the price of commodities. 
Hence the institution of public economy being false in 
its 23rocess of equity, is confused in all its results, and 
labor, however great its capacities, having no immunity 
but that which human experience defectively provides, 
may be likened unto one who has great titles which are 
disputed, and is from that circumstance no better in 
condition than if it were without right, because it is with- 
out justice. 



CHAP. V. 

OKIUIX OF MONEY AXD DEBT. THEIR EFFECT OX THE SOCIAL 
GOXDITIOX OF MAN. 

The invention of money is ascribed by Heeodotus to 
the Lydians. Ancient writers, however, differ upon the 
point. There is, moreover, an evident misap23lication of 
language in speaking on this subject. Coining cannot 
be regarded as an invention, since it made no alteration 
in the naethod of using the metals, other than was the 
common practise of barter. Stamping by public authority 
to attest weight and purity, neither affected the value 
of the products nor fulfilled any office wdiich could 
not have been as safely exercised by the community. 
]^or could magistrates offer any greater security against 
alloying or counterfeiting the precious metals, than if 
the attesting had been performed by tradesmen whose 
judgment and integrity would, at least, have guaranteed 
the public against abuses which rulers in every age have 
not scrupled to practise. 

Governments having invariably exercised the office 
of weighers and assctyers, also assumed the office of deter- 
'mining by legal enactment valu§ and capacity, and her@- 



« 



e 



in commitied a violation of economioal law, involving 

social calamities, 'erninable onlv in the eventual extinc- 
tion of industrial progress and tlie dissolution of national 
power. The Chinese government alone forms an histori- 
cal exception in the hnancial policy of a great state. 
Gold and silver coin was current amongst this people at 
a very early period. These, however, have been for 
many ages almost abandoned, in consequence of their 
scarcity, and copper coin substituted, which now circu- 
late as the common medium of exchange. They also 
used sheets of silver for merchandising. A-Vlien a pur- 
chase was made, the buyer dipt a piece from his sheets 
which the seller, vdio was alw^ ays provided with a pair 
of scales, ^veighed and accepted in payment. These 
pieces were then used in current exchange. The causes 
which arrest the progress and prevent the decline of that 
singular community, are first, the paternal character of 
its government ; secondly, their contempt for trading 
pursuits and military spirit ; and thirdly, the destruc- 
ii(»n of iheir infants, which restrains population to the 
limit of tlieir resources. To what extent these politi- 
cal circumstances are attributable to their inferiority 
of race, it is properly for natural philosophy to deter- 
mine. 

The Romans used the temples of their gods for th|^ 
manufacturing of coin. It was wdthin the sacred resi- 
dence of Jrxo MoxKTA that the coinao:e of £fold and sil- 
ver was conducted, and deposits of money kept. The 
officers who superintended were called the Monetariij 
hence the derivation of the X^yiw 7 noney. As the temples 
of the gods, our modern coining-houses or mints will dis- 
appear when men have become w^iser. The materials of 
economical science are, however, only attaining definite 
forms and qualities. Law^s cannot be deduced, much 
less demonstrated, until an object, or series of objects 
have perfected their distinctive properties. Combina- 
tions of men into nations for economical or industrial 
purposes necessarily precede a knowledge of the laws 
upon which such organizations should be conducted. 
Civilization may, therefore, be said still to be in an ex- 
perimental condition. The labors of the most profound 
thinkers who have contributed to this soiencej have thus 
been attended with difliculties, wdiich could not be ob- 



37 

viated, and which have only been partially surmounted 
bv immense research. 

When primitive industry had even so far progressed 
as to have divided into several branches, exchange would 
present few difficulties. The few and rude nature of the 
products wonld be bartered without inconvenience. 
Copper and silver, in the course of time, would enter 
intt) the materials of maniifactnre. The high value of a 
piece of copper or silver wonld render it available for 
exchange as well as manufactures. He v,dio did not want 
to barter a sheep for a spade, or a bale of wool for a 
plough, would barter the sheep or the wool for a piece 
of metal, and thus facilitate the exchange to the con- 
venience of the mannfactnrer. 

Money thus satisfies an immediate want, being simply 
a deposit of equivalent security, to supply a futnre want. 
It facilitates industry or supplies a necessity, when 
direct barter would postpone the exchange until the 
wants of both exchangers had matured. Money antici- 
pates consumption. The demands of the more nrgent 
precede and stimulate the operations of the less nrgent. 
Each buyer depositing a piece of metal for the product 
reqnired, if the quantity of pieces multiply definitely 
and aggregately with commodities in a determinate ratio, 
then every article produced w^ill be vended. Su23posing 
one piece of silver will circulate live times its value, 
then that proportion must be preserved, or the capacity 
of exchange will be less than the capacity of produc- 
tion. The ratio should proceed thus — silver 1 — pro- 
ducts 5. 2-10, 4-20, 8-40, 16-80, 32-160. General 
production, however, progresses at a ratio far exceeding- 
this compntation, or inverse snpply of money, and, there- 
fore, the condition of all nations have eventually dete- 
riorated with the extension of their resources. 

As barter is the earliest form of exchange, only a few 
transactions would require the intervention of metal. 
The impediments of transferring one value for another 
would be overcome by the combined process of direct 
barter and metallic barter. Every invention aiding the 
productiveness of industr}' would, however, receive en- 
couragement. Contrivances would multiply as handi- 
craftsmen increased, and not till men had congregated 
in considerable numbers would barter becouie less prac- 



3S 

licaljle, and tlie inconvenience of a scarcity of money 
produce injustice and oppression. 

'No motive to the violation of morality could arise in 
the earliest and simple condition of society. Artificers 
would, therefore, mutually accommodate each other. 
Whatever was necessary to prosecute their respective 
trades would he promptly contrihuted hy those who held 
the requisite materials. It would, however, soon be 
found that more pieces of silver were necessary to pro- 
duce a machine or piece of cloth than could be innne- 
diately obtained for either in exchange. An ounce of 
silver might buy the products of a week's labor, but the 
artificer vrould require to outlay five, ten, or twenty 
ounces to procure tools and proper quantities of material 
for his simple enterprise. These could be obtained more 
easily on credit, then pieces of silver could be obtained 
to cancel the accommodation. At first the inconvenience 
Avould scarcely be felt, as no defiiute time for payment 
was probably exacted. 

Such a condition of simplicity would disappear as the 
different degrees of accumulation began to manifest the 
])rogress of wealth, correlatively with the enlarging 
populousness of each city or community. Barter would 
tjecome less and less practicable as cities increased. All 
trades becomino^ divided and sub-divided to facilitate 
production, the exchange of product for product would 
become commercially impracticable. Jfoney, so essen- 
tial in trade, yet so inadequate to its requirements, 
necessitated the aid and multiplication of credit. Debt, 
thtts became in the progress of society the only alterna- 
tive against returning to a state of nature. 

Credit commences with the civil state. It is the act 
of one citizen extending his industrial aid and faith 
to another. Without it civilization would have been 
impracticable. Its destruction even at this moment 
would dissolve any commonwealth. While its increase 
facilitates industry, and adds to the income of the pro- 
ducer, it essentially conduces to the wealth and advance- 
ment of the nation. Whenever it exceeds the propor- 
tion which money can properly cancel, then it becomes 
a clog to industrial enterprise, and diminishes the wealth 
of a community. One citizen becomes the oppressor of 
another, and a universal tyranny pervades society. Debt 



89 

and credit, evidently accelerate tlie enriclnnent or ruin 
of a people. 

Money alone cancels debt and, therefore, the current 
quantity of money determines the limits to which the 
profitable use of crcdH can be carried. The proportion 
of credit, limited in its circle of extension by this law, 
regulates the extent to which commerce can be safely 
and profitably pursued or expanded. Whenever the 
wealth and productive powers of a nation exceed these 
limits, the unvended over-produce enters into forced 
competition with the other produce in the progress of 
circulation, and degrades the value of the whole circu- 
lating in the marts of industry. Credit instantly becomes 
less advantageous and more necessary. 

Credit soon changes from the borrowing of a day's 
labor to be repaid with a day's labor, or a bushel of grain 
to be repaid with a bushel of grain, to merchandising 
and borrowing money upon heavy usury. The medium 
of exchange becomes j^'^ivate jjroperty^ which is neither 
lent freely nor upon liberal terms. It is difficult to obtain 
money on credit from the same cause that it is always 
difficult to get it in exchange. Tlie scarcity of the quantity 
in circulation renders it, therefore, ruinous at times to 
borrow on interest, or to obtain in exchange for goods. 
Yet the interruption to industry is still more ruinous. 
Those who can borrow have, therefore, great difficulty to 
repay, and impoverish themselves frequently to keep 
their credit. Such has been the social condition of man 
throughout the past as it is at the present. 

The quantity of debt in all nations bears a definite 
proportion to the current quantity of money. If the 
aggregate silver and gold in circulation does not progress 
with the progression of capital, the ratio of credit can- 
not be safely augmented, whatever may be the require- 
ments of trade. Debts can only be contracted benefi- 
cially to aid commercial and domestic exchange con- 
formable to the limits set by the instrument which can- 
cels it. Thus we find current commercial credit in 
England is fifteen to one of hanking discounts. It is 
possible that it might be carried to twenty to one^ that is, 
twenty millions sterling of current credit to one million 
sterling of current bank circulation. But as credit en- 
larges, the danger to commerce increases. The least ob- 



40 

stniclioii to trcidiiig activity under such circumstances 
involves consequences proportionately more rninons to 
tliose who liave employed tlie greatest credit. The most 
nsefnl and enterprising are, consequently, the most certain 
victims to the interruptions and vicissitudes of linance. 

Governments seem to have interposed in the operations 
of trade, anterior to the earliest records of history. 
Debts were reclaimed hy law amongst the Egyptians, 
and inability to pay provoked the most severe penalties. 
The debtor became the slave of the creditor, and civili- 
zation was thus perverted, with all its powder over its in.- 
dividual members, to an unlimited tyranny. Personal 
liberty and inviolability, the most sacred condition of 
the civil state, were thus revoked — without any moral 
or adequate oifence against the community. 

The insecurity of a state of nature, which men sought 
to escape, was revived in the social combination by 
laws founded on error. Property was not secured to in- 
dustry, and when poverty ensued, debt became the al- 
ternative, and enslavement the penalty. In this matter 
the Greeks copied the Egyptians, the Romans copied the 
Greeks, and modern nations have copied the Pomans. 
We are becoming wiser than our predecessors, yet the 
prevailing laws on debt and debtors are discreditable to 
the age. Amongst the ancients, as with us, the state, 
not the individual, is the oifender. The liberty of the 
citizen, which is the foundation of the civil compact, 
hitherto outraged from this special cause, has, through- 
out the past eventually been expiated in national igno- 
miny and destruction. 

Moses witnessing this fearful oppression, with its insep- 
arable and debasing consequences, occasioned amiongst 
the Egyptians, provided, with great wisdom, in framing 
the constitution for the Hebrews, that all debts should 
be periodically canceled, and any forfeiture of rij^ht 
intervening the seven years when this decree took 
effect, was restored in its entirety to each individual. 
The Hebrew law-giver also provided, that no interest 
was to be taken for money amongst the Jewish people. 
This law was an exception to all others, as it was not 
clothed with the spiritual character which pervaded 
nearly every legal injunction. It was not, therefore, on 
moral but political grounds that usury was denied — as 



41 

Moses expressly sanctions the right of usury being taken 
in their dealings with other nations. 

This will account for the adventurous and trading 
character of the Jews, who, finding they could not make 
j)rofit by usury in their own country, would naturally 
carry the gold and silver they had acquired by their in- 
dustry to the seats of traffic. We hnd the founder of 
Christianity commending this spirit of enterprise in the 
parable of the faithful servants who were severally 
entrusted with so many talents of money. A premium 
was thus oiFered under the Mosaic law for carrying 
money out of the Jewish community for the purposes 
of commerce and profit. 

The Hebrews, however, enjoying the use of money 
from each other without usury, secured ad^vantages of 
manufacturing cheaply, possessed by no other contem- 
poraneous people. In the manufacture of hne linen and 
other fabrics which became the subjects of commerce, 
they evidently commanded special facilities. The exces- 
sive rates of interest which prevailed amongst the an- 
cients, and which added largely to the cost both of pro- 
duction and exchange gave to the Hebrew merchants a 
most profitable commerce in their intercourse with the 
Phenicians and Greeks. Thej^ thus exercised a two-fold 
means of realizing riches, namely usury and comparative 
cheapness of ]}Toducts. 

The institutions and rural condition of the Jewish 
people also gave them the means of being sellers rather 
than buyers. On this account whatever their traders 
realized in foreign lands would be remitted principally 
in gold and silver, and not in the more cumbrous com- 
modities. It was by traffic, but probably more by 
usance, the Jews acquired their proverbial riches. And 
what is not less remarkable, the monopoly of the precious 
metals which they attained, was the result of the legal 
restrictions which rendered them the least productive of 
any class of property amongst themselves. The regal ex- 
travagance of Solomon, which seemsneither to have been 
oppressive to the nation, nor unsuited to the tastes of his 
subjects, testify the great riches and prosperity to which 
the Jewish community attained. Those salutary laws 
which had mainly contributed to their v^'elfare, became 
relaxed with their opulence, and eventually usury and 



42 

monej changing Leeaiiie as conmion in Judea as in other 
eonntries. 

When Solon was raised by his oppressed countrjnuen 
to the high office of law-giver, he found all the lands in 
the state of Athens irrecoverably mortgaged and the 
people overwhelmed vrith debt. The populace demand- 
ed the abolition of debt and the distribution of the lands. 
He conceded the former, and decreed the canceling of 
all debts, but firmly repulsed the latter. This clamor 
about the division of land is as common amongst the mul- 
titudes which compose our modern cities. It was several 
times effected by the Eomans. Insecurity of trade, fre- 
quent interruption to employment, with periodical ruin, 
combine to direct men's minds to the possession of land 
as the only reliable guarantee for subsistence. 

When land was mortgaged in the Athenian State, a 
practise prevailed of putting up a post, with an inscrip- 
tion, announcing the debt. The custom though necessary 
for the interest of those who loaned money, when insti- ■ 
tutions and lav/s were of the rudest and simplest charac- 
ter, must have been most repugnant to the spirit 
of a people whose personal and ^^olitical freedom 
necessarily inspired the strongest impulses of pride. 
Lacedemonia Avas overwhelmed with similar social 
burdens. Lycurgus not only abrogated all claims of 
debt, disburthening the numerous proprietors of land, 
but he decreed that iron and not gold and silver should 
be the future currency of the Lacedemonians. 

So scarce were the precious metals, that the rate of 
interest was generally about one-third of the amount 
lent. Aristotle, who observed the rapid process of con- 
fiscation which the high rate of interest inflicted, terms 
usury '^ rajpine^'^^ and disputes the right of any man ob- 
taining interest out of money as incompatible with its in- 
vention and institution. The necessity of borrowing 
arises from the scarcity of money — the incapacity of 
paying ari&es from the necessity of borrowing. Since it 
was not only that men borrowed because they could not 
vend, but because of the high rate interest imposed — 
exacting principal in the form of usury, and rendered 
cancelment frequently impossible. 

Over trading and over speculation are common charges- 
made against the merchants as a class, whenever a crisis 



in finance reverses tlie progress of trade. Such argu- 
ments seem invented to shelter ignorance by charging 
the responsibility of social misfortnne upon its victims. 
Bnt, were it asked, why have the holders of land, whose 
frngality and cantion are proverbial, so generally become 
overwhelmed with debt, it would be difficult to reply. 
Not from over tradino- like the merchant. 'Not from 
speculating like the enterprising capitalist. 

Agriculture is subject to the same confiscatory laws, 
though they operate in a diiferent manner and by a 
slower process. Land is the most tangible of all prop- 
erty, and therefore, the safest inv^estment. Land can- 
not be multiplied like trading capital, and consequently 
a family of four or five sons must, if they are to succeed 
in the world, become professions or traders. Consider- 
able expenses are necessary to give a fair start to each 
one. Low prices for produce, or bad seasons from time 
to time, demand a modification of rent, when probably 
the demand upon the means of a parent is the heaviest. 
Portions must be given to some, respectability upheld, 
and debt is the alternative. 

These causes combined, not less of antiquity than at the 
present time, have subjected the classes who hold land 
to the same dependency and oppression incident to com- 
mercial undertakings. More than one-third of the pro- 
duce of the soil of France is required to pay the annual 
interest of the mortgages upon it. Debts multiply in- 
versely with the scarcity of money and the high rate 
of interest. According to the statistical estimates of 
M. AuDiFRET and M. Raudot, both of whom mem- 
bers of the French legislature in 1819, the total annual 
product of the soil of France was eighty millions ster- 
ling. These authorities have computed thirty millions 
sterling to be the annnal interest of mortgages on the 
land — twenty millions sterling the state and local taxa- 
tion exacted, leaving only twenty m^illions sterling for 
the subsistence of the cultivators and proprietors. Tliis 
vast acumulation of debt had taken place since the revo- 
lution of 1793. 

On the authority of many professional men entrusted 
with the execution and transfer of titles of land ceded 
to railway companies, under acts of Parliament in Eng- 
land, it has been stated that the value of one-thiTd of 



44 

entire land tliroiiglioiit the lines siirvejed was mortgaged. 
This would be equal, at least, to half the rental. Inte- 
rest of money is subject to no vissicitudes, nor its ful- 
iilment to anv delay. The law of entail howeyer, ex- 
ceptionally shields the possessions of the British nobil- 
ity against the general statutes on debt, and absolyes 
each consecntiye generation of liabilities which other 
wise would, in all probability, haye long since periled, if 
not oyerthrown their political supremacy. 

The first social reyokition of the Romans, which estab- 
lished the tribunal magistrature, was occasioned by the 
insupportable oppression of debt. This occurred within 
fourteen years after the expulsion of the Tarqnins, and not 
exceeding 26-1 years after the building of Kome. What 
were the subsequent and repeated struggles of the Ro- 
mans to disentangle themselyes of debt is a dark re- 
cord of their political history. War and conquest 
were but professions amongst this people like any -other 
calling, honorable in the sentiments of the populace, 
and profitable at times to all engaged in it. These contri- 
buted, howeyer, less to the national wealth than a 
proper disposition of their industrial energies would 
haye done, and though it accelerated the ascent to na- 
tional predominance, it was deyoid of stability and pre- 
cipitated rather than retarded the progress of their poli- 
litical declension. 

Debt accumulated more rapidly amongst the ancients 
than with us. The excessiye rate of thirty-four per 
cent interest, common to those ages, manifested the great 
scarcity of money compared to modern times. Interest 
would then compound and equal the principal, if 
paid half yearly, in less than two years and a-half. 
Interest paid yearly now would not compound and 
equal the principal in less than thirteen years. The 
statute fixing the rate of interest in England at fiye per 
cent was one of the most salutary laws for the interest of 
trade eyer accorded by legislatiye justice. 

The yalue of that measure cannot now be appreciated, 
^or can it be estimated how much it contributed to 
facilitate and cheapen domestic production, and to aid 
the merchant in successfully competing with the mer- 
chants of other countries — extending the foreign trade 
and giying to Britain a command oyer the precious met- 



45 

als, greater than all other commiimties. A low rate of 
interest evidently conduces to the increase of money, 
while a high rate produces the opposite result. Products 
buy gold and silver, and that people which can sell the 
cheapest will obtain the most of these metals in ex- 
change. The scarcity of metallic money does not, there- 
fore, confine its oppressive eifects within the circle of 
domestic industry, debasing the value of labor and com- 
modities, it also enters into the economy of commerce, 
and one nation becomes the oppressor of another, as one 
man had become the oppressor of another — the stronger 
competitor destroying the weaker, j^otwithstandins; the 
comparative abundance of money amongst the British 
traders, it has been computed that upwards of thirty mil- 
lions of ])ounds sterling is annually lost by bankruptcies 
and compositions. 

The celebrated Lord Bxicox suggested the propriety of 
making two rates of interest — one for large sums and 
another for small. It is not necessary to examine this 
opinion more than to exhibit the difficulties surrounding 
the nature of money, and the innumerable remedies 
which the most profound have sought to modify the 
financial error urged throughout this work. Organic 
laws operate irresistibly. The most ingenious devices 
or judicious administration, cannot avert the evil conse- 
quences of their violation. Undeserved misery, unmer- 
ited bondage, unnecessary privations, have spread their 
blighting influence throughout the area of civilization in 
the past and the present, paralyzing industry and subvert- 
ing justice, while thrones have tottered and fallen amid 
the general wreck of national anarchy. Even the inex- 
haustible beneficence of the Creator — the incomputable 
powers of human genius — the limitless energies of hu- 
manity have been dashed from their natural course, and 
the magnificent purposes for which infinite wisdom be- 
stowed them on man, lie like a broken vessel, with its 
treasures spilt upon the earth. 



46 



CHAP. VI. 

EEDCCTIOX OF THE WEIGHT OF COrN" A MEASUEE OF NECES- 
SITY EESORTED TO BY ALL NATIONS, ANCIENT AND 
MODERN. THE RELIEF ONLY TEMPORARY. 

With Yery little variation tlie pound troy of twelve 
ounces in weiglit, has been the standard unit of account^ 
first adopted by nearly all communities. The Mina of 
the Greeks, the As of the Komans, the Livre of the 
French, and the Pound sterling of i\iQ English were 
orighially all of that weight. With the Hebrews the 
Shekel did not much exceed nine onnces. The Mina 
was coined into seventy-three drachmas, each drachma 
containing abont seven pennyweights of silver. By a 
pnblic decree it was coined into one hundred drachmas, 
each containing less than five pennyweights of silver. 
This measure added a fourth to the current money 
in circulation. Plutarch says that it was remarkable 
in its eifects — ^prices were not raised, and, therefore, the 
creditors did not sufi'er by the change. 

1^0 doubt the Greek economists would find some difii- 
culty in solving this singular result in the laws of value. 
A bar of silver one pound in weight, would not, it is 
supposed, exchange for more than its worth, though 
coined. Either the silver was exchanging previously 
above its value — which is but reversing the difiiculty, or 
silver when coined, circulates without an exact respect 
to its value. Silver will certainly exchange above its 
value when it becomes scarce. When products are sold 
beneath a fair price, silver is commanding more than its 
proper value. The scarcity of silver may, however, be 
so great as to leave much produce unvended, even at 
the lowest prices which could be accepted. A two-fold 
loss is thus inflicted. Deficiency of demand is added to 
deficiency of price. Under such circumstances a reduc- 
tion of the weight of coin restores, in some measure, the 
natural relations of value. Money being numerically 
greater, multiplies demand without adding to price. 
JProducts which were tbrmerly surplus, or the products 
which could have been supplied at prices current, find- 
ing a demand hitherto denied, compensates the grateful 



47 

producer too amply for him to increase Lis demands for 
higher prices. The capacity of the coin to discharge 
debt not being diminished, though the weight had been 
so, its capacity to buy the same quantity of products 
would not be affected. This is conSrmed upon the best 
authorities. 

Other communities suffering from the same cause, can 
little spare any portion of the silver which has fallen to 
their share. A general debasement of prices and a high 
rate of interest, which is a premium against exportation, 
combine to prevent a great influx of silver to a nation 
even where it may command a degree of higher value. 
Whatever additions are thus gained, are so limited that 
they may increase accommodation rather than price, 
and thus by encouraging trade cheapen many products 
instead of raising them. There is besides, a tendency 
to raise the value of silver in other countries to the de- 
nomination effected in a particular community. 

ITuME in his " Essay on Money,'' quotes Du Tot, a 
French writer, in support of this fact. The Mark of 
thirty livres was coined in the last year of the reign of 
Louis XIY, into fifty livres. Each livre passed current 
for nearly the same quantity of produce. A century 
had elapsed without material alteration. Mr Hume does 
hot dis[>ute. neither does he explain, in what manner the 
abstract value of silver does not change correspondingly 
with the reduction of weight. 

When a community can vend the products of labor 
readily for current prices, the coin received being capa- 
ble ot lawfully canceling the current debts between 
man and man, no one is exact about the weight of silver 
contained in the coin. Its lawful denomination is the 
public guide. It depends upon the prudence and sagac- 
ity of a government to what extent such alterations can 
be safely effected. To multiply demand by enlarging 
the numerary circulation, not only promotes "the increase 
of national wealth by the activity of domestic industry^ 
it also extends the foreign trade of a country, by en- 
abling the merchant to export many articles previously 
too dear — the weight of foreign coin bearing a greater 
value. There is also a lendency to pull down the value 
of money in the neighboring communities, and thus 
prevent any change in the value so adopted. 



48 

If a scarcity of money limits the operations of pro- 
ductive industry, a reduction of tlie weight of coin in 
the proportion to such impediment would occasion no 
advance of price. Taking the margin of unemployed 
labor at one-tenth, the deliciency of money is determi- 
nate in that degree. One-tentli of the annual product 
of wealth amongst a people is thus obstructed, because 
it cannot be sold. A reduction of one-tenth of the 
v/eiHit ot coin would acid a tenth to the numerical cir- 
Gulation of money. Sequentially such an addition of 
money would add to the demand of commodities instead 
of to the price of them. Supposing silver capable of 
this diffusive action, the productive powers of a com- 
munity being yet capable of enlargement beyond the 
new limits, competition also steps in to repress the ten- 
dency of prices to rise. However, these measures have 
generally been resorted to during war, for the purpose 
of raising revenues, and not from any commercial con- 
sideration. They have, therefore, contributed in a 
small degree to the interests of trade. Excessive altera- 
tions on the return of ^^eace might restore to the com- 
mercial cities an influx of silver — which operating upon 
the quantity of produce in the hands of the merchants, 
raise prices and concurrently excite throughout the na- 
tion a rise where no increase of money had taken place. 
And hence, reduce in current exchange the value of sil- 
ver in some measure to what the state had formerly 
raised it. 

Practically a reduction of the vreight of coin by an 
indirect process makes it a subject of commerce and so 
far as it accomplishes this end, it mitigates the evils in- 
separable from its natural and institutional character. 
!N"eccssity rather than wisdom generally urges princes to 
the adoption of measures which modify or aggravate the 
difficulties of the commonwealth. When, therefore, the 
understanding of rulers is unequal to its ofiice, and cir- 
cumstances instead of foresight, impose action, the safety 
of a people must indeed be in the hands of feeble mas- 
ters. We cannot feel surprise at the calamities through 
which nations pass, if we bear in mind that statesmen 
are men of education more than of experience. Born in 
opulent circumstances and despising the pursuits of trade, 
they cannot comprehend the innumerable evils incident 



to tlie exertions of those who supply the revenues and 
riches they dissipate in ignorance or extravagance. 

In the first Punic war the Romans reduced the weight 
of the As from twelve ounces to two. It was reduced to 
one ounce in the second Punic war, and to one-half 
ouQce in the third. 'No complaint was made of these 
extraordinary reductions by the creditors, probably be- 
cause the current value of the coin was in a small de- 
gree diminished. Dr. Adam Smith expresses some sur- 
])rise at so unaccountable a circumstance. During such 
emergencies the scarcity of coin would compensate by 
adding value correlatively with the dimunition of its 
weight. These measures would adjust prices to the ex- 
traordinary expenditure and debts inseparable from war, 
giving elasticity and prosperity on the return of peace. 

It is possible that in the wars with Carthage the trea- 
sury would be often exhausted to supply the forces with 
every possible means to sustain their contest and secure 
success. Many years would elapse before the return of 
the precious metals so dispersed, and the change of weight 
would gradually have changed the nature and denomi- 
nation of debts. As this measure was resorted to in each 
successive war with Carthage for increasing the finances 
of the state, and by consequence relieving industry, 
we may feel assured that it was urged by that sagacity 
and foresight which characterized the policy of the Ro- 
mans in all great emergencies. 

Debt had produced serious defection, and even 
occasioned revolutions long before the first Punic war, 
hence we may infer that no alternative was left but 
the adoption of these measures to prosecute their sev- 
eral wars with any chance of success. During such 
crisis prudent statesmen will not scruple to adopt meas- 
ures which in ordinary periods the powerful interests of 
the wealthy would render dangerous for the most influ- 
ential ministers to attempt. When the illustrious Wil- 
liam Pitt, in 1797, signed the order in counGil suspending 
the legal liability of the bank of England to convert its 
notes on demand ; the act was promptly endorsed by the 
rich, and his capacities to direct the policy of that criti- 
cal epoch at one recognized. 

James I. was urgently advised by the eminent 
Raleigh to reduce the weight of coin that he might 
a 



50 

increase the money within liis realms. Commercial, 
and not state exigencies, seem to have actuated the 
views of the w^riter. He says : " touching the eoin^ 
for the most part all monarchs and free states. Loth 
Heathen and Christian-, as Turkey, Bai-bary, France^ 
Poland, hold it a never-failing profit to keep their 
coin at higher rates within their awn territories than 
it is in other kingdoms. The King of Barhary find- 
ing the gold coin leaving his kingdom by merchant 
traders raised the go]d ducat, which was current tor 
two ounces of silver, to lour, live, and even six 
ounces. This caused gold to come into the country. 
He then raised the silver coin to retain it." He also 
adds^ "The King of Poland raised the Hungary ducat 
from fifty to seventy-seven Polish groshes." 

These measures could only afford temporary advan- 
tage to the interests of industry and commerce. There 
is no device of the state by which coin can be made per- 
manently abundant. Its natural scarcity also produces 
the collateral evils of hoarding and exportation. Many 
accumulate coin as they would accumulate stocks of 
goods, or houses, or any other property. K^ot because 
they would not like to realize profit, but that they pre- 
fer to forgo the chance, from the great danger of los- 
ing what they have gained with so much labor, and 
which they so much prize for its incomparable utility. 
Hoarding is, therefore, a custom which prevails to the 
greatest extent, where money is the most scarce — irreg- 
ular in circulation, and hard to acquire. 

Some communities sufi:er greatly from a constant 
drain of their coin. Is^ations separated merely by a 
geographical demarcation cannot by any possibility pre- 
serve an exclusive and necessary amount of coin with- 
in their jurisdiction. The Athenians stringently pre- 
vented the coin Irom being carried out of the state. No 
exceptions were made unless in case of war or apprehen- 
sion of famine, when it might be exported for grain. Eng- 
land executed not less strictly her laws against the car- 
rying of coin out of the realm. Her insulated position 
gave her abundant means of executing such provisions. 
France on the contrary, with numerous nations lying 
upon her line of frontiers had no means of preventing 
the efflux of her coin. Her finances, both in peace and 



51 

war, have, on this account been subject to great derange- 
ment, compared with Great Britain, Irom a cause 
which the insulation of the latter greatly diminished 

France of necessity has reduced the standard weight 
of her coin more frequently and to a greater extent 
than England. The livre^ originially two huadred 
and forty pennyweights of silver, contains now only 
about three pennyweights^ while the pound sterling, 
originally the same weight as the livre, still contains 
eighty pennyweights of silver. France, being also the 
leading and most wealthy community on the continent 
of Europe, occasions, by her superior resources, a 
tendency to better prices than prevail amongst the 
poorer and inferior communities which rest on her con- 
fines. This acts as an encouragement for the eifusion 
of her coin without her dominions. Yfhat she could 
sell cheaper than her neighbors they are too poor to 
consume, while they can sell cheaper many products 
which she requires for consumption. Cheapness is a 
premium by which one country seduces another out of 
its scarce and always requisite coin. 

The wealth of France has been greatly retarded 
through these circumstances. Whenever an abundance 
of coin occurred, whether through the importation of 
bullion or from the reduction of the legal weight, her 
prosperity and augmented consumption offered a mar- 
ket for the products of customers who sold but did not 
buy. Her circulation thus diminished with the continu- 
ance of her prosperity and thrifty progress. Credit 
strengthening with her activity would accommodate the 
requirements of trade, and thus supply, for a time, the 
inconvenience arising from the growing scarcity of 
money. Even the frugal and prudent of her own nu- 
merous people, always apprehensive ol adversity, sick- 
ness, and age, habitually reserve and hoard their sav- 
ings and, therefore, contribute to the general causes of 
decline. Recurring depression has thus gradually pre- 
vailed throughout her innumerable branches of trade 
and industry, l^ov can there can be a doubt that the 
political instability of the French nation is specially 
superinduced by the insecurity of its commercial and 
industrial condition, arising from the irregularity and 
scarcity of circulation. 



52 

The middle classes in France having less means of 
accumulation or security than the same class in Eng- 
land, are less conservative of authority. Besides they 
suffer more immediately from any interruption in trade. 
Hence the sympathy of men distinguished both by edu- 
cation and birth, with the most absurd and theoretical 
schemes of social change. The abrogation of the ancient 
rights of the nobility, and the division of the lands, has 
diminished rather than augmented the resources of the 
soil. But failure in economieo-political projects does 
not, it would seem, discourage these disastrous jphiloso- 
phies which prepare nations for ruin by the disorganiza- 
tion of all sentiments of respect to established institutions 
and rights. It is construction conformably to existing 
interests, with the expansion and development of those 
civil immunities yet imperfectly exercised even by the 
more fortunate, and not through disorganization that 
nations can realize the sacred purposes of civilized justice 
and moral equality. A false principle in the economical 
body, like a disease in the physical, operates under 
different conditions with a greater or less degree of 
severity. 



CHAP. VII. 

TUE PKECIOrS JIETALS, IIOWEA'ILR ABUXBASTLY PRODrCED, 

NEVEK ADEQUATELY FELFU. THE FUNCTIONS OF 

MOXEY. 

An abnnclance of gold or silver, by sndden discovery, 
relieves for a time the immense demands of trade. Most 
of the new supply, when first thrown into the market, is 
added to the coinage. The old consumers do not pur- 
chase more jeweiery and plate than formerly. Trade is 
stimulated for a period by the multiplication of coin. 
Those classes who previonsly could consume such valu- 
able manufactures soon participate in the augmented 
profits of trade. Tlieir abilities to purchase enlarge 
with the extension of enterprise, and the advanced prices 
ttf products. A new and larger class of consumers is 
also lifted up during the transition, to a condition of 



Oi5 

affluence, who cau indulge in such luxuries. Consump- 
tion ultimately increases in greater ratio than supply. 

It holds as an in variable rule that the consumption of 
certain luxuries is only limited by the means of the com- 
munity to purchase, as there is no limit to such wants. 
That portion of the precious metals left for circulation is 
but the index of limitation of private means, and that 
limitation is determined by the nature of the metal& 
limiting the power to produce and, therefore, means to 
purchase. Those who can only obtain the comforts of 
life, and others, by far the most numerous class of old 
communities, who can scarcely obtain bread enough for 
their families, will contribute little to the trade of the 
jeweller. To pre-suppose the continuation of this condi- 
tion of things while the powers and resources of civiliza- 
tion are hourly multiplying beyond estimate, is to ad- 
mit the destiny of the species no longer a problem but a 
failure. 

J^otwithstanding the immense issue of gold coinage 
within the last seven years, of upwards of one hundred 
tnillions sterling from the mints of the United States, 
Britain and France, the tradesmen of the former country 
suffer, at this time, inconvenience in obtaining payment 
from each other, which seems unaccountable. In Brit- 
ain and France it is true, that wages being much lower, 
manufacturers and trad<6smen suffer less from heavy 
outlay, and have even the means of accumulating cash 
beyond their business requirements, but the operatives 
in these countries reap no further advantages by the 
great increase of money than merely an additional 
security for employment. 

Universally raw materials have risen in price w^hile 
labor^ being much more abundant than any product in 
the market, has not advanced. Man is a product, sub- 
ject to the laws of value, yet less subject to restraint 
in the production than any other. His value is debased 
proportionately to its excess. Tlie supply of money has 
not yet equalled the supply of labor, while it has con- 
siderably exceeded the supply of many products. Thus, 
compensation to industry is really diminished, though 
the immbers employed are greatly increased. 

Every class in American society expect to realize pro- 
perty. Fewer, hoAvever, are in a position to acquire 



54 

possession of substance or estate at the present time than 
there have been for many years. Rents and real 
estate being much raised absorb the reward of labor, and 
the returns of the tradesman, leaving both less powerful 
to contend with those who got the start on the first influx 
of the precious metals. The abundance of gold thus 
confers a monopoly rather than a common immunity, 
since before it has passed into the hands of the great 
body of society, it is employed to purchase estate and 
raw products in masses, to be re-sold at great cost. It 
becomes absorbed in high prices by such means, and be- 
fore it attains a general diffusion it is found to be inade- 
quate even to absorb the available labor of nations, much 
less compensate the laborer for the higher cost of living 
or rent. 

Tlie productive enterprise stimulated by the flood of 
gold from California, conferred suddenly great riches 
upon a few favored in their position, who now exercise 
the immunities thus attained, to absorb, from their hum- 
bler neighbors, the profits of labor and trade. Industry 
is neither sustained in its reward, nor trade aided in its 
progress by a uniform and necessary accommodation. 
Rents do not correspond with business, because the har- 
vest of business has been preceded with the lustier reap- 
ers. Tlie channels of circulation are no sooner filled 
than they are drained. A scarcity of gold is an oppres- 
sion, an abundance a monopoly. 

The condition of America differs widely from England. 
Wages are higher, both really and nominally in the for- 
mer. In the latter the largest class consume the least, 
and are but humble customers to trade. On the contrary, 
in America there are no retired rich class, Vv'ith large in- 
comes derived from sources not immediately dependent 
on trade. Xo one has large income but what arises from 
the immediate employment of capital. The wages of 
labor and its employment thus co-operate and participate 
in the extending enterprises of the rich. It is a state of 
transition. When it is established, wages will recede to 
the level which prevail where competition increases 
with population. 

Goods are cheap in old countries because wages are 
low, and trade is limited because goods are cheap. 
Money is comparatively abundant in such communities 



because enterprises are few, absorbing neither the sav- 
ings of the merchant nor the labors of the workmen. 
Gold flows from this country to Enrope, leaving enter- 
prises to stagnate from its absence, while it stagnates 
in the banks of Britain and France, from the absence 
of enterprises to employ it, or it has to be re-exported 
for investment. 

Every man who accumulates a few hundred dollars 
in America, places it in business or property, in which 
he secures probably four times as much more credit. 
'No amount of gold which could be produced would sus- 
tain these multiplying operations. The great majority 
who venture, ho|)ing to share in the enjoyment of pro- 
perty, find it impossible to prosecute their plans. They 
ultimately relinquish with loss the projects which seemed 
so propitious. Eventually the greater part passes into the 
hands of the few, whose overwhelming opulence will yet 
surpass^any thing history has recorded. 

Commercially America is a buyer, Europe a seller. The 
balance of imports annually require the entire product 
of gold bullion, together with the sale of large amounts 
of railway stock, to adjust them. Tliis vast and increas- 
ing demand from so young a nation does not arise from 
the quantity of gold held or circulated, but from the 
immense banking accommodation in the respective states 
of the Union. With less than one-tenth of the capital 
of Great Britain, and mth scarcely one-half the foreign 
trade, there is discounted to her trading population hank 
notes, bearing a denomination to the amount of one-fourth 
more value than the entire notes of Great Britain and 
Ireland. She relieves, through this special immunity, the 
glutted markets of Europe. Absorbing, without diffi- 
culty, the glut^of its population, and by her numerous 
enterprises, opens the most profitable and secure invest- 
ment for the capital which otherwise accumulates and 
gluts the channels of European finance. In round numbers, 

Bank circulation in Great Britain and Ireland, JC30,000.000 
Bank circulation in the United States, £40,000,000 

Equal population in both countries. 

To what extent the vacuum of money had been carried 
throughout commerce previous to the recent discovery 



56 

of gold, may be estimated from tlie additions which have 
been made to general circulation, and which has been ab- 
sorbed without an actual depression of its value. The 
laws of nature are irreversable. K states repress and 
circumscribe the value of a product which they have 
made the special organ of interchange, of enumerating 
value, and of discharging debt, the condition of their 
people must be debased to a degree perilous to authority, 
and requiring a severity in the exercise of power repug- 
nant to the spirit of the age. 

Such an abundance of gold as would cause its deprecia- 
tion would reduce it to the same relative proportion it 
naturally bears to the agregates of all other property. 
Fixed property would bear higher rents, products of ex- 
change a higher price, and therefore the metals di- 
minished in value would sink in their capacity as 
money in the same degree. A depreciation of one-half 
the value of gold would be equal to the destruction of 
one-half the quantity in circulation. While in raising 
wages universally to a higher standard of denomination, 
it would in the same degree reduce the value of the gold 
mines, and thus limit its production. A mine now pro- 
ducing one million pennyweights of gold, produces an 
equivalent of one million bushels of wheat. Should the 
gold depreciate so as to rais9 wheat to two pennyweights 
of gold per bushel, the mines would lose half their value. 
Wages would maximise in every other product, but in 
the commodity of gold wages would minimise. Both 
labor and capital will, in such event, abandon to a con- 
siderable degree the enterprise of gold mining. The 
product of gold will thus be arrested when it has become 
the more necessary to sustain the enlarged prices which 
its depreciation had produced, and the enlarged opera- 
tions of industry which its comparative abundance had 
superinduced in its transition from a high value to a 
lower. 

If an ounce weight of gold exchanged for a ton of Pig 
iron, were to sink one-half in value, two ounces would 
be required to exchange a ton of iron. The dispropor- 
tion of gold to perform the office of money would not be 
changed, nor the numerical caj)acity of the metal multi- 
plied. Such an event would, however, reduce all debts 
one-half as it would double the income of the producers, 



TV'lio are tlie debtors, and proportionately raiee prices to 
tlie consumers. 

TI18 flood of precious metal wliicli poured into the 
channels of European trade, afler the intercourse with 
America was opened, unlocked the eriergies of com- 
merce in every civilized community. Obviously some 
obtained a greater share than others, from their mari- 
time position. Britain probably gained the most. Her 
insulated and maratime advpmtages, combined vrith her 
immemorial statute provisions against the exportation 
or melting of coin, gave her equal means to acquire and 
a greater security for the retainmeut of her coinage 
than any other country. What was not sufficient for the 
industry of all, gave to that nation which liad the greatest 
share, proportionately greater facilities in her productive 
efforts, and a larger expansion of trade. 

The multiplying increase of gold and silver in England, 
by stimulating labor, called forth her resources, and 
thus augmented the power to retain their immunity for 
longer periods than other nations. These temporary 
advantages raised the commerce and gave to Britain 
a degree of permanent superiority vvdiicli has rendered 
her, as a state, the most powerful in financial resources, 
though the condition of her people has not advanced wdth 
the capabilities of the nation. 

The maximum supply of metals from America had 
however, not been attained in the early part of the 17th 
century, v^^hen commercial difficulties again presented 
themselves. Money became scarce. Men had entered 
the pursuits of trade when it was profitable. Multitudes 
left the rural districts where labor was over-abundant, 
and congregated in cities where trade offered sufficient 
employment, better vfages, and the ]3rospect of position. 
Products multiplied — money did not. There vv^ere more 
sellers than buyers. Underselling and cheapening com- 
peted and subdivided the inadequate circulation. The 
remedy aggravated the disease. Everything was reducovl 
to stagnation and depression. There is no stationary 
maximum for population or property. Hence, before the 
precious metals have reached their maximum supply, 
the irregularity in the circulation, and scarcity of coin 
become manifest in trade, though the lowest point of 
depreciation may not have been touched. 

H 



58 

We may judge what a state of depression followed im- 
tnediately upon tlie great prosperity whicli prevailed 
during the reign of Elizabeth, from the letters addressed 
in 1610 to her successor, by the writer previously quoted. 
" It being apparent," says Raleigh, ^' that no three 
kingdomes in Christendome can compare v/ith your 
Majesty for support of traffic and continual employment 
of your people within themselves, having so many great 
means, both by sea and land to enrich your coffers, 
multiply your money, enlarge your traffic, make your 
kingdome powerful, and your people rich. Yet, through 
want of employment they are poor, many of your land 
and coast towns are much ruinated, and your kingdome 
in need of coyn." The highest average price of grain 
was not reached till between 1630 and 1640. Gold and 
silver were depreciating, therefore, at the period when 
Sir Walter wrote. 

Coin distributes itself into many millions of hands, 
and is unavailable in large quantities for the purpose of 
mercantile dealing. Tlie merchants were, therefore, 
driven to employ extensively the use and aid of credit 
to enable them to carry out their trading enterprise. 
Their obligations frequently became due before they had 
vended the goods thus purchased. The merchant was 
then impeached with over-trading. Sir Walter in his 
day thought the merchants blameable, and charged this 
to their imprudence. It is impossible to describe the 
thousand causes which are continually arising to defeat 
the most judicious calculations in commercial life. We 
cannot, however, be much astonished at such opinions, 
when economical science was so little understood, and 
especially when Dr. Smith falls into the same error. 

1^0 one will give goods on credit when they can get 
ready money. If ready money is not attainable, it is 
the necessity, not the choice of the manufactm*er to urge 
the merchant to take his products on credit. Should the 
merchant refuse to accept them on credit, then the busi- 
ness of production stops, or is greatly limited. Com- 
merce is sustained by credit. The merchant in turn 
sells on credit, and trading imperceptibly advances 
from simple exchange to that of commercial record. 
Or edit becomes the 'base as well as the super structicre. 
.Society rests upon its strength, the subsistence of the 



59 

community is drawn from its expansion — tlie progress 
of civilization treads in its footsteps. 

There is no relative supply of the precious metals to 
the progressive capacity of general production. Credit 
fills in some degree the vacuum. The metals are at all 
times accidental in their supply, and never so abundant 
as to facilitate the operations of industry for any great 
period. The demand for them as articles of luxury aug- 
ments with civilization — their supply on the contrary, 
invariably decreases by the law of natural exhaustion. 
Whenever the accidental supply of gold and silver has 
increased temporally with the productive capabilities 
of nations, the progress of wealth has advanced with 
marvellous rapidity. 

The only correct means to estimate the sufficiency or 
insufficiency of gold and silver to exchange and distribute 
national wealth, is the readiness or difficulty of com- 
manding a market for commodities offered for sale. If 
the wealth of a nation has multiplied to such an extent 
that the deficiency of general demand is continually 
causing reductions of price, it is then evident that the 
ratio of wealth has exceeded the ratio of money. A 
deficiency of money operates first by reducing demand, 
reduced demand acts upon the value of commodities and 
reduces prices to the lowest value at which they can be 
produced. As, however, prices cannot be indefinitely 
reduced, the fixed costs in production preventing a far- 
mer or manufactui'er producing below a given point, 
when prices have been reduced to that standard, the 
definite quantity of money will be able only to exchange 
the definite quantity of commodities. Production is then 
limited to that quantity. TJie svjpreTrie law of mditstrial 
'progress at this stage of cwilization is inverted^ demand 
determines and regulates sv/pply^ instead of supply regu- 
lating demand. The employment both of capital and 
labor is necessarily reduced, to supply produce according 
to this limited measure of trade. Aggregate produc- 
tion is diminished to the aggregate of money. Employ- 
ment is reduced to represent money instead of money 
being increased to represent caj^ital and industry. Com- 
petition commences with reduced demand, and increases 
in intensity with the progress of population. 



60 



CHAP. YIII. 

EFFECTS OF EAISIiS^S THE WEIGHT OF COIN POLITICAI. AND 

SOCIAL CONSEQUENCES. 

History presents no instance in wliicli a great commu- 
nity lias preserved tlie original weiglit of coin. The pro- 
secution of an unavoidable war, or the bankruptcy of 
the public exchequer, arising from the failure of taxes, 
may have impelled the modifications. Financial obstacles 
are not less incident to peace than war. There is no gov- 
ernment in Europe which has not felt great difficulty in 
raising revenue for the ordinary purposes of the state, 
within the last forty years of ]ieace. Population has 
largely multiplied during that period, from whose indus- 
try reveime is derived, mechanical inventions have ren- 
dered their capacities fifty -fold more productive — capital 
has accumulated to facilitate re-production, yet with all 
these additional elements, both of individual and of na- 
tional resource, rulers have been driven to the last 
alternatives of finance to meet the public expendi- 
ture. In former times, when the means of commu- 
nities v/ere comparatively scanty, we may easily infer 
the difiiculty to collect revenue, and the urgency of such 
measures as reducing the weight of coin to supply the 
deficiency. 

Till recent, the British government has frequently been 
compelled to cover the annual deficit by the extensive 
issue of exchequer bills. These bills are redeemable 
debts, bearing three half-pence per day for one hundred 
pounds sterling. It has also sought to reduce expendi- 
ture by such impolitic measures as the abridgement of 
the pensions of the common soldiers, and neglecting to 
make the requisite expenditures to keep the army and 
navy in that efficiency which would render the nation 
safe'^either in a v/ar of defence or of urgent policy. France 
has added largely to her national debt to m^eet the finan- 
cial requirenients of the state. Austria has become 
bankrupt. Russia had considerably increased her debt 
previous to the late war- Spain has been incapable of 
meeting; even the interest of her public liabilities. 



Gl 

These financial embarrassments, however, lie deeper 
than the necessiries of states. What the people have not 
sufficiently for the ordinary purposes of trade it is diffi- 
cult for government to extract for purposes of a more le- 
m.ote nature, though not less essenlial to the security of 
their industrial efforts. If men have not money to meet 
their business wants — if borrowing — giving and receiv- 
ing credit — ^hourly devising how to obtain or give ac- 
commodation — how pavments of bills coming" due can be 
made — how to raise money to pay wages, all of which 
urgencies are immediate to their existence — if these 
naturally precede even private expenditure, it is clear 
that all articles bearing or sustainini^- taxation will be 
evaded, and their consumption diminiBlied to the loAvest 
point, equally from motives of prudence and necessity. 

As modern enterprise and commerce has so little sup- 
plied nations with the necessary gold and silver for the 
requirements of industry and revenue, few will fail to un- 
derstand what must have been the pecuniary difficulties of 
trade, and the financial embarrassments of ancient Chris- 
ian nations when these metals were so rare. Upwards 
of thirty alterations had been made in the British coin- 
age inclusive from the reign of Edward I. (1272) till the 
reign of Elizabeth. The pound sterling having been re- 
duced from twelve ounces troy, to iour ounces — the 
weight at which it now circulates. 

During the reign of Charles 11, government resorted 
to the clumsy process of clipping the coin. This un- 
statesmanlike practice was continued throughout the 
reign of his successor, James II. According to Lowdnes, 
the silver coin was reduced one-fourth in legal weight. 
Prices had not advanced perceptibly. Grain averaged,. 
from 1600 to 1650, 66 pence p>er bushel. From 1650 to 
1700 it averaged 68 pence per bushel. So small an ad- 
dition to the price might be ascribed with much reason 
to the troubled condition of the country, rather than ta 
the lightness of the current coin. A dynasty had been 
twice displaced amid civil w^ar during the latter period. 
The consequent interruption to industry probably ope- 
rated on the price more than the coin. 

The treasury accepting this clipped coin in payment 
for revenue, rendered it legal money. One-fourth taken 
from the statutory weight of coin would add numerically 



62 

tbat amount to the current circulation. If sm millio'iis 
sterling of silver was made current in eight millions 
sterling^ without producing any additional price, the 
quantity of value exchanged must have been increased 
in this proportion. Industry would be encouraged in- 
versely as trade was facilitated Abstract and positive 
law evidently conflict. Intrinsic value in silver or gold 
does not, it would seem, diminish with the reduction of 
weight. These metals circulate above and below their 
values, since they operate upon aggregates, reducing de- 
mand instead of price in some cases, and in others mul- 
tiplying demand instead ot })rices. 

For instance, one thousand ounces of gold, at four 
pounds sterling, may be current in exchange for one 
thousand bales of wool. The cost of production may re- 
quire one ounce of gold to compensate the producer. 
ISTow the quantity might be increased to one thousand five 
hundred bales of wool. The additional quantity offered 
for sale would require an additional quantity of gold 
to buy it. This additional quantity being the index of an 
increase of rural population, would equally indicate an 
increase of city population who are wool consumers. 
If the gold is not forthcoming the wool producers pru- 
dently regulate the stock and labor under their direction 
to the law of demand. The quantity that can be sold is the 
quantity produced. A surplus city population increases 
inversely with the glut of rural population. The vacuum 
of money to exchange produces a proportionate vacuum 
of employment distributed through every branch. 

LTnder such a condition ol trade, where the power to 
produce is restrained, and the w^ants of men unsatis- 
fied, if the ounce of gold was coined into six pounds 
sterling^ money would be numerically increased to the 
numerical capacity of production. Industry would be 
called forth to multiply production to the demand. Coin 
Avould exchange upon its denomination^ afibrding the 
same compensation in each sale, and a much larger 
compensation upon the aggregate. The intrinsic value 
being determined by the relative value, it becomes a 
matter of enquiry whether the natural value of any com- 
modity can be ascertained which is under the action of 
statute law. 

The true value of gold is evidently subject- to great 



63 

modification in its capacity of money. A judicious re- 
duction of weight, when industry is interrupted by the 
scarcity of coin, increases the riches of the common- 
wealth, and enables the conirauDity to contribute, with- 
out oppression, ample taxes to the state, either under 
direct imposts or through a larger consumption of articles 
bearing taxation. To pursue an opposite policy is not 
less destructive of the public interest than it is of the 
public revenues. 

When William, Prince of Orange, undertook to re- 
store the coinage to its traditional legal weight, the 
accomplishment of this absurd measure was followed by 
consequences which involved his government in tlie 
most serious embarrassment throughout his reign. Rais- 
ing the weight of the current and mutilated silver coin 
from ninepence to twelvepence sterling practically re- 
duced the current circulation one fourth. Assuming 
the current money of the kingdom to be ten millions 
sterling this measure would reduce the amount to eight 
millions sterling. 

The re-coinage was carried into execution about 1690. 
Grain sunk to an average of 53 pence sterling per 
bushel, from ITOO to 1750. It eontinued to suffer the 
depression so severely that it sunk to 48 pence sterling 
per bushel, on average, from 1Y30 to 1750. These re- 
sults took place notwithstanding a large emission of 
bank paper legalized concurrently, together with special 
statutes to sustain the price of grain. 

Certainly no man ever ascended to regal power under 
more auspicious circumstances, or by more legitimate 
means, and no prince ever conducted himself with more 
prudence or deferential respect to the sentiments of a 
great people than William of the House of Nassau. 
This ill advised financial experiment, however, touch- 
ing the coin almost cost him the prize of his ambition, 
the throne of England. The throne shook beneath its 
new occupant. His tremulous hand grasped a sceptre 
no longer the instrument of power, but the emblem 
of constitutional submission. The highest aspiration 
of human instinct is the investiture of supreme power 
for great services to a great people. Those principles 
of religion, which gave an exalted renown to his valor, 
clothed him, in a degree, with the merits of Crom- 



64 

well, while liis rank arsd marriagG claimed especial con- 
sideration amongst the established families of two 
great nations, sustained wiih a puwerfui section of a 
third. 

Monarchy, in his person, became the type of na- 
tional miiry and power. He recognized the great idea 
of constitnti()nal government, and accepted the restraints 
of lawful authority without the relinquishment of royal 
dignity. The political and moral elements of the age 
were settled in the public mind. His nieasures, as a 
statesman, were a diiierent matter Every one was to 
profit or suffer by his policy. In touching the currency 
his advisers violated, what ought to have been con- 
serverl. Eespeet to his sagacity, and gratitude to his 
religious fidelity, combined with the vicissitudes through 
which the country had passed suppressed the murmurs 
of the people, and probably saved the nation from 
another revolution. 

To what extent the industry of the nation suffered by 
the re-coinage and increased weight of money may le 
judged from the circumstance, that year after year the 
public revenue declined, notwithstanding the imposi- 
tion of several additional taxes. A foreign prince was 
loudly denounced. One measure alone could save the 
new dynasty, which was to borrow money in such 
amounts as would carry it through an indefinite financial 
crisis. The goldsmiths of London had for a long period 
circulated notes upon their personal credit, amounting, it 
is said, to several millions sterling. This species of finan- 
cial accommodation had attracted the attention of the 
new sovereign, and negociations were opened with the 
goldsmiths for aid to the treasury. These conferences 
terminated in a loan and a hank charter incorporating 
the goldsmiths. Such was the concurrent institution of 
the Ba7ik of England and the national debt^ in 1694. 

From 1695 to 1700 no less than seven ads of parlia- 
ment were passed to secure the necessary revenues 
without rasing the required amount. Some taxes were 
increased, some modified and again re-enacted, new 
taxes were added and abandoned. Personal estate was 
raised from 24 shillings per £100 to 25 shillings, poll 
and wages tax were added, other taxes retained at for- 
mer rates. 



65 

Revenue produced at 24 shillings per jClOO 
on personal estate, and 4 shillings in the 

rental of real estate per £l in 1692 Xl,923,712 

do.... in 1693 1,913,488 

do in 1694 J, 860,039 

do.... in 1695 1,736,248 
4 shillings in the jCI real estate — 25 
shillings per jCIOO personal estate, 

with poll and wages tax in 1696 1,663,434 

Deficit in 1696 against 1692 ,,,,,, , jE:259,278 |^ 

Deficit in five years revenue jC520,6i4 

The effect upon excise and custom re- 
turns was probably as great. 

In 1697 the government found it necessary 
to reduce the taxes, both on real and per- 
sonal estate, notwithstanding the increas- 
ing deficit. Revenue then sunk to .... jCl,484,015 

The oppressed condition of the country 
seems to have required a further modifi- 
cation of taxes, and we find that the rev- 
enue produced in 1699 from the sources 
specified, was only £989,965 

Anne^ who snceceded William in 1702, taxed tlie sa- 
laries of public officers, and raised several taxes whicli 
liad been greatly modified. Yet the amount raised in 
1712, upwards of twenty years after raising the weight 
of the coin, did not much exceed the revenue of 1692. 

The decline in the price of wheat, taken as an index 
of decline in the price of manufactures, must have 
operated with corresponding severity upon the interest 
of trade. To sustain tlie price of y;rain a bounty was 
given to encourage exportation whenever it sunk to a 
certain price. It did not, however, protect the interests 
of agriculture against the operation of the new coinage — 
as we find the price of grain continued to descend for 
sixty years after the coin was raised. Between 11 SO 
and 1750 grain sunk to an average of 4 shillings sterling 
per bushel, against the average of 5s. 8d. in the preced- 
ing century. Commerce profited ultimately by the 
measure. After a series of years the pressure operating 
to debase the land and its products, as also the products 
of art, cheapened the means of living and gave to manu- 
facturers a degree of power to produce at prices which 
tended to increase the ioreign trade. 

Low prices depressed the condition of the agri- 
I 



cnltnrjil classos, hut it tended to compensate tlie de- 
pressed nianiit'actiirers. The emission of biiidc paper 
also contrihiited to facilitaie the enterprises of ti'ade, 
and lience we iind, from 1710, a gradual increase of 
puhlic revennes from customs and excise. Public 
expenditure, liowever, seems still to have exceeded the 
annual returns while the seductive facilities of borrow- 
ing continued to multiply the public debt. The social 
condition of the people, after a Ion <j; period of depression 
and misery, resumed itsibrmer state of progress, through 
that energy, enteipi'ise and genius in the national char- 
acter, wliich evon the folly of her statesmen was in- 
capable oi' destroying. 

The disastrous effects of raisin i>: the wei^lit of coin 
when public debt was unknown and public revenue did 
not much exceed /'oy/r jnillums steHmg , would, however, 
lead us to form but a faint estimate of the consequences 
which accompanied a similar measure in 1817, when the 
annual revenue required vmsjifty mdllions sterlwg^ and 
the public debt amounted to nearly 07}e thousamd mil- 
lionet i^icrling. The current pound sterUng^ was raised 
one-third in value by statute— the measure being urged 
upon the ground of sustaining faith with the national 
creditors. 

It is impossible to describe the ruin or compute the in- 
justice inllicted upon the nation to accomplish so theoreti- 
cal a measure. From 1797 to 1817 the public liabilities 
of the country luid au<xmented five himdrcd ■niillio'ns ster- 
ling^ while the private liabilities of the community must 
have greatly exceeded this sum. I^rices sunk in a far 
gi-eater proportion tlian money was raised. Wheat was 
reduced from ten shillings per bushel to five shillings, 
manufactures were reduced fifty, sixty and in some 
articles seventy per cent upon the prices current during 
the war. The nobility, in 1811), passed a law specially 
to protect the price of grain, and to counteract the statute 
they had passed raising the coin to its traditional weight — 
the etlbcts of which they tlius blindly sought to remedy. 

Political disorder, insurrection, and conspiracy ac- 
companied the commercial depression consequent upon 
the financial act Twelve years after the adoption of 
this measure the throne and nobility were constrained 
fo relinquish the sovereign power ot tlio realm, at tiie 



♦>7 

demand ol' a ])()i)uhir comhiiialiou, uiiccjualled in iJic; 
history of nations. The (iist,iii<;iiiHho(i leader of tbis' 
movement, TliomaH Attwood, hail (unployed every meanK 
to disHuade the l>ritisii uiinistcu's ag'aiiist inci'ea,sin_ij;' liie 
value ot the money current, for so long and so critical 
a ])eriod, but iindini;- his etlorts i'ruitless, he a])|)eahHi 
to the nation. Neilliei* tlie aristocracy nor the mer- 
cantile classes seemed to comprehend the nature and 
elfect of tliese financial measures. 'Die political re- 
volution did not, th(!refore, ameliorate the condition of 
trade, nor mitigate tlie miseries of the ])eople. No one; 
appeared, in the new Parliament, to deal with ho com- 
plicated Jind important a subject. 

(Jommercial convidsion, depression, and speculation 
had alternately aroused aiul j)ro8trated the energies of 
the nation. Two-thirds of the entii-e farmers of England 
and Scotland were reduced to ruin and abandoned their 
farms. From 1817 to iS50 thc^ liii'ming enterprise of 
the country passed into the hands of one-third the nnrn- 
ber of occupants. These were me?i of ca[jital who had 
v/ithstood the shocks ot depression, to whom the land- 
lords transferred the small farms at even lower ])rices 
than were paid by the former tenants. The labor t)f the 
])easantry diminished ])ro|)ortiomitely, while the pro- 
ductiveness of the soil must Inivc^ been rc^tjirded to an 
extent now incomputable. Ii(^huid hjiving l(^ss capitid 
to fall back u[)on, sujdc instantly under the prosti'ation 
of prices and the depi'ivation of markets for her j)ro- 
duce. Her oppressed jjopulation, thrown from employ- 
ment consumed instead of multiplying their limited ac- 
cumulations, l^'amine and in<lolence dominated the land. 

In lujglaiid both trade and agriculture W(;re not less 
sacrificed. Deficient employment rendered the poor- 
rates a constantly augmenting tax u[)on the trad(3snien. 
Private incotne was declining with the diminishing i)riceB 
of goods. Taxes were changed and re[)ea]ed to silence the 
murmurs of the people. A short exj)eriment necessi- 
tated their re-imposition. The right of the destitute to 
])ul)lic relief was abrogated. The religious and civil, 
polity of the country were revoked, and those who were 
v\rithout em})loy merit or pro])erty were deprived all title 
to life. Whenever a tax was raised consum[)tiou di- 
minished proportiomitely. l^»|)ulation multiplied not- 



■withstanding-, and each experiment in legislation ap- 
peared to urge the attempt at a new one. 

Goods were thrown periodically into the markets of 
the world in such masses, and at priees so ruinously 
low, that bankruptcy at home, and ruin to the struggling- 
manufacturers of foreign nations combined to render 
the raising of the v/eight of money, in a nation exercis- 
ing the first commercial power, a source of injustice and 
depression tliroughout civilization, not less than amongst 
her own people. 

From this financial cause the British peerage have 
frequently submitted to popular demands which fore- 
shadowed their ruin. As a co- ordinate power in the 
constitution their authority is gone. For a time the 
complaints of the people have been suppressed by their 
comparative prosperit3^ The influx of gold has repealed 
the fatal statute which spread moral and physical de- 
vastation throughout the British Isles. Economical 
science will probably prevent the recurrence of that 
special cause wljich has obstructed the progress of in- 
dustry in all a^es, and which legislators have in &o many 
instances greatly aggravated by their presumption snd 
incapacity. 



CHAP. IX. 

DISTINCTION OF MONEY AS xVN INSTKt'MEST OF DEBT A:KD 

AN INSTRUMENT OF EXCHANGE, 

If it is correct that governments ought not to interfere 
with trade by coining money ^ or fixi7ig the price of the 
precious metals, then all laws relating to usury — penal- 
"ties and personal degradation for debt — are equally un- 
warranted. Even the reclamation of debts where the 
means to satisfy the claims are abundant, would be 
better left in the hands of the citizen, than in the au- 
thority of law. Large sums of money or merchan- 
dise Avould be advanced upon imdoubted securities, 
while limited amounts of both would be advanced with 
equal safety, where industry, character and ability w^ere 
the only securities of the creditors. 



69 

The borrowing of money, or the obtain nient of goods 
on credit, are voluntary and mutual transactions. So 
far from being wrong, either in themselves or sequen- 
tially, they are the essential processes by which industry 
replaces the exhausted resources of society. They are 
not less the means of individual subsistence, than they 
are the indispensable agency through which the existence 
of nations are preserved, and civilization advanced. 
How, therefore, states have erected such acts into crimes, 
which have brought upon the most valuable members of 
the community the severest penalties which human au- 
thority could inflict, it would be difficiilt to find an 
apology, much less a defence. 

A man who has money to lend, and lives by such 
business, contributes little to the general riches of the 
commonwealth. On the contrary, liis income has gene- 
rally been a tax upon the industry of others. The bor- 
rower is never accommodated but upon ample security, 
or strong confidence in his morality and means. If the 
high rate of interest, or the depressed condition of trade, 
or both, so diminish his resources that it should happen 
he cannot pay, these misfortunes combined with his in- 
ability to obtain further loans or credits, are penalties 
greater than the most exact justice would impose, 

Tlie lenders suffer nothing in the vicissitudes of civ- 
ilized life compared with the losses of the merchants 
and trading classes. Besides, the general security in 
the transactions of money discounters, amply compen- 
sate for the rare defalcations of their customers. Be- 
tween the merchandisers there is relatively to the finan- 
cial credit extended both by private and banking ac- 
commodations, fifty-fold the credit exchanged, with no 
other guarantee frequently, than reputation. The history 
of debt is a record of legal violence against the subject, 
which the moral calamities and political consequences of 
war would scarcely parallel. 

Law apparently ought not to interpose between the 
debtor and creditor. Penalties and disabilities inflicted 
by authority do not serve the ends of justice nor retrieve 
loss, since restitution of property cannot be made when 
the debtor has adventured without success, or may 
have lost considerably what he had credited in the 
common course of business. It mav irratifv re venire — 



TO 

tlie passioii of all otliers which himiaii law is iDstituted 
to repress. 

In Britain, France and the United States, laws relat- 
ing to debtors, are becoming less and less operative, if 
not obsolete. Experience is teaching men engaged in 
business, that a mntnal settlement of liabilities in all 
cases is invariably the most advantageous to the cre- 
ditors, while the usefulness of the debtor is preserved to 
his family and society. Dishonesty may occasionally 
be practised, but such a commodity is always in the 
commercial market, and it behoves the sharp-witted 
tradesman to avoid dealings in so unprofitable a pro- 
duct. The vigilance of a prudent merchant is, how^ever, 
more effective against fraud than the most cunningly de- 
vised and stringently executed legislative provisions. 
And those who set aside the power or interference of law 
in the difficulties which arise to intercept their progress 
in business are generally the most judicious. It is to be 
presumed they incur the least loss of all others who prefer 
compromise to reclamation, thus circumventing the 
cupidity and and dispensing with the costly services of 
lawyers. Unnecessary loss on the one hand, and oppres- 
sion on the other, are equally avoided. 

The amount of debt current among the members of a 
community is great or limited according to the wealth 
and rescources they possess. The larger the capital and 
trade the greater the current debt. There is a greater 
requirement for money and a greater means of com- 
manding it by a wealthy people. The amount of money 
actually required cannot, however be commanded, even 
by the richest communities, under the present laws which 
prevail in civilized nations. Extreme riches, the most 
intense competition the lowest social condition, the 
largest amount of bankruptcy, occur Avhere the accumu- 
lation of capital and the productive capacity of a peo- 
ple have attained the highest conditions. The dispro- 
portion between the power to produce and the power to 
exchange is wider, under such circumstances, since the re- 
venues of property are debts which must be satisfi.ed be- 
fore the wages of industry are distributed. 

Thus the permanent debt of Gi*eat Britain cannot fall 
short of 6,000 millifms derling. The annual interest, at 
tliroe per cent would require 200 millions sterliiKj. If rent 



Tl 

and taxes are payable quarterly, 50 millions sterling of 
money is thus requisite to discliarge these obligations 
before the incomes of the 23roductive classes are consi- 
dered. Should the quantity of money current be defi- 
cient to meet equitably and amply the reward of the 
whole, then industry must suffer, as its employment and 
wages are conditional, while the demand of the govern- 
ment, the landholder, and the mortgagee are legal, im- 
perative and unconditional. 

It is probable that the annual value of the wealth 
produced in the United Kingdom did not exceed 300 
tnillions sterling from 1820 to 1850. Two-thirds of the 
total product, therefore, is required to pay the fixed in- 
terests of the nation. One-third only being distributed 
amongst the millions for subsistence, comforts and refine- 
ments. The bank circulation through that period had not 
exceeded 30 millions sterling. Throwing gold out of the 
calculation, as it wdll not alter the principle, the propor- 
tion of bank money being to debt 30 to 6,000, is £1 to 
£200 of debt. The proportion of bank money to annual 
production being 30 millions to 300 millions sterling is £1 
of money to £10 of exchangeable productions. Debt thus 
absorbs two-thirds of the national resources. 

In the process of production and exchange, should this 
amount of wealth be transferred and circulated twenty 
times it v/ould make the monetary and industrial trans- 
actions of the country 6.000 millions sterling. The 
disproportion of bank money to the circulative wants of 
commerce would be £1 of money to £200 of transactions. 
As this would not perform one exchange of the twenty 
required, ^^7^5 (^Z" c/'<36^^^ are multiplied to make up the 
the vast deficiency. The circulation of bills of credit 
per annum from the stamp office returns, bear nearly 600 
millions sterling. The transference of these bills cover 
the entire volume of exchanges. On this calculation there 
are 20 millions of transactions and payments per day for 
three hundred days in each year. Twenty millions of 
debt, therefore, originates and matures daily. 

It is easy to contemplate from these calculations what 
must be the effect of the slightest reverse action in this 
vast machine. Twenty-eight millions of human beings 
hang for subsistence upon its hourly motion onward. 
So exact are all its parts, that the smallest additional 



weight placed upon the value of money, which is its 
moving power, and every motion collapses. The strong 
and the weak are crushed in one common ruin. 

Money, it appears evident, bears a far greater dispro- 
portion to the value of accumulated property than to 
the value of annual production. Its legal requirements 
as an instrument of debt, exceed in amount and precedes 
its requirements as an instrument of trade and industry. 
Rent and taxation must be met, thourrh half the popu- 
lation of a country go unemployed. If tlie margin of 
money beyond the fixed obligation of a nation can ab- 
sorb the industry of the people they will be employed. 
The number absorbed will depend upon the money 
available for the discharge of debt and the work of pro- 
duction. Money, in its capacity as an instrument of 
distribution, inexorably transfers the lull denomination 
of legal liability, thus revoking the claims of equity, and 
becoming the source of indescribable wrong. 

The annual production of Great Britain has within 
a few years, greatly augmented by the influx of 
specie. It is now, probably, increased 100 millions 
sterling. The fixed claims upon the national resources 
being still 200 millions sterling will leave a margin of 
an equal amount for distribution amongst the pro- 
ducing classes. According to the latest returns the ex- 
port trade has risen from 50 millions sterling annually 
to 100 millions sterling. This would make the foreign 
trade absorb twice the former amount of labor, yielding 
twice the wages and profits to the efi'orts of industry. 

The immense revenue drawn from British industry, 
and which ought to have been added to the producers 
prices, has been extracted out of them. Prices have 
been debased by statute, as well as cheapened by new 
methods of production. Ten jper cent of cheapness in 
the process of manufacture has been accompanied with 
ten per cent ot statutory debasement or depreciation. 
Every improvement of method, which multiplied j^ro- 
duction, concurrently sufi'ered a proportionate depression 
under the action of the law. With her vast pro- 
ducts Great Britain now commands the largest partici- 
pation of the precious metal circulating in the republic 
of commerce. Her industrious people having sufi'ered 
for many years the oppression of debts doubled by legis • 



73 

lation — the change in the standard of value likelj to (^c- 
€ur will reverse the effects so produced, and confer the 
first advantages of such a revolution upon their interests. 

The influx of gold now flov^dng into her channels of 
trade will possibly operate against the interests of the 
creditors. Her multiplying population, and the foreign 
investments of her capitalists yet absorb the stream and 
prevent such an internal suffusion as would act upon 
the price of labor and thus raise the price of her 
manufactures. Before long a depreciation of gold will, 
in all probability take place. England, from her com- 
mercial position, will naturally feel the first influence of 
the change. The social condition of her people will be 
temporarily relieved by raising the denomination of 
prices and diminishing proportionately all revenues 
drawn from their industry. That class of creditors whose 
annuities are limited, providing only the means of mod- 
erate respectability or subsistence will suffer in the same 
dee^ree that the humbler manufacturers and operatives 
suffered under the act^ cleprecia^ting products. 

A contingency of even greater importance would 
eventuate. Should the prices of British manufactureg 
rise, other nations will compete with her more than suc- 
cessfully, who have hitherto resorted to heavy tariffs to 
protect their manufacturing eft'orts against her power of 
capital, but especially against the debased prices of her 
fabrics. These tariffs will operate, under such circum- 
stances, almost as an exclusion, while it will strengthen 
ih.Q domestic prices of France and America, giving to their 
manufacturing capacities a greater power of accumula- 
tion, and more exclusive control of markets which the 
policy of England has rendered necessary to the employ- 
ment of her people. 

ISTo one, who has given consideration to the subject of 
flnance but must contemplate, with some degree of appre- 
hension, the consequences which may arise by the annual 
addition of 20 m^7^tc>n5 sterling to the supply of gold. 
At present it appears to be absorbed more rapidly than 
it can be produced, if we are to judge from the embar- 
rassments of the banks, both in Europe and America. 
These are, however, no data on which an opinion can be 
correctly formed. The improvement in the condition of 
civilized coramunites has given to the great majority the 
J 



74 

means to reserve a few pieces of gold, snd the millions 
thus absorbed from circulation cannot be computed. For 
a series of years this will continue and conceal the actual 
condition of finances. As communities acquire confi- 
dence they will seek to use the gold now being absorbed, 
to gain profit by investing it in such classes of property 
as may seem most secure. It will then be thrown in 
masses into circulation, and the depreciation will take 
place with the same sudden effect, as inyariably occurs, 
where an over investment of capital in a special enter- 
prise augments the nominal value of the stock. 

In this case the gold so held locked, will operate upon 
aggregates, and once put into circulation it will not re- 
turn to private hands until it has been absorbed in the 
higher price of products and property. Capitalists will 
obtain command and possession of the savings of the 
multitudes and will employ it to sustain aggregate value 
to the point it may ascend. What is not not now used 
for the purposes of trade will pass, in such a case, into the 
banks where it will become a glut, or if discounted ope- 
rate inevitably upon produce, by its own depression. In 
the reign of Elizabeth the standard value of produce and 
estate was raised in this sudden manner. A quarter 
(eight bushels) of grain rose from 25 pennyweights of 
silver to 160 pennyweights. 



-o- 



CHAPTER X. 

CIRCULATION OF MONEY REGULATED BY DETERMINATE LAWS. 

Upon equal inclines the greater the volume of gravity 
the more rapid the velocity. So in the case of money, 
the larger the volume of quantity the more rapid the 
circulation. Some have thought, like Lord Liverpool, 
that if there were less money amongst a people it would 
circulate with greater activity, and thus serve the re- 
quirements of trade as well as a larger amount. On this 
principle a ship laden with oranges could be as quickly 
discharged with one basket as with ten. If there is 
only one pound or one dollar amongst ten producers 
who interchange with each other, nine must always 



76 

be without money. The one who is the holder to- 
day may not see a fair investment, or feel so much ur- 
gency to expend as the nine others. His [ delay will 
deprive some of profits, others of what is most requisite 
to their wants. Each day, in such a case, will bring 
its embarrasments, delays, and losses to the greater num- 
ber. 

This will apply to eveiy civilized community, how- 
ever large or limited. In every condition of progress, 
from the rudest efforts of agriculture to the highest 
state of productive and commercial enterprise, the 
same principle prevails. Facilities are gain, obstruc- 
tions are loss. A scarcity of money reduces numerical 
exchange, and obstructs circulation definitely to the de- 
ficit. An ample accommodation of money facilitates 
exchange, and indefinitely multiplies circulation. The 
cost of exchange is rednced by the increased transac- 
tions. Industry is stimulated by the increased demand. 
The sources of public wealth are enlarged, cheaper ex- 
change and additional production. 

If one hundred merchants, each require one thousand 
pounds or dollars of accommodation on the same day from 
a bank, when only-half that amount is in its till^ then 
each must accept only -half their requirements, or one- 
half of the number go without, until deposits accumu- 
late to supply their wants. K the deficiency of accom- 
modation is permanent, then each merchant regulates his 
business accordingly. Business thus limited restrains 
enterprise. The loss of profits to the merchant repre- 
sents tenfold the loss to the producers, whose industrv 
is limited to the operations of the merchants. Manu- 
facturers compete to share the inadequate discounts 
made to the merchant. The merchants compete to obtain 
retail customers, that reduced profits may be compen- 
sated with increased business. The traders compete 
to share the expenditure of the consumers. The in- 
come of each class is reduced by the reduction of 
prices, and the means to consume is thus generallv 
and periodically diminished through that unhealthy com- 
petition which multiplies production to force demand, 
while it reduces compensation and destroys the power 
to consume. 

If the quantity of money current in a nation is 7iot 



Y6 

equal to the wants of industry and the obligations which 
industry has permanently to discharge, the oppression 
upon the producer increases with the increase of num- 
bers. For instance, if out of the thirty millions sterling 
discounted in the United Kingdom of Britain it requiret* 
tioenty millions to meet punctually the recurring de- 
mands of rents and taxes, ten millions sterling is the 
the whole marghi left for the payment of wages and the 
profits of trade and commerce. As rent and taxes do 
not diminish, on the contrary, additional accumulations 
require additional money to meet their demand and sus- 
tain their value, the limited proportion becomes less and 
less adequate to the necessities of the producing multi- 
tudes. The aggregate quantity of money remaining 
stationary, while populousness is increasing, and the 
capacity of production is multiplying, the circulation 
becomes divided and subdivided, leaving each less to 
expend, and numbers without either employment or 
means. 

Assuming that money has a circulative capacity of 100 
times its denomination, 30 millions sterling will circulate 
3000 millions of value per annum. If the distributive 
capacity of 30 millions is 10 times its denominatory 
value, then the distribution of wealth will be 300 mil- 
lions sterling per annum. Should issues of bank money 
be raised to 40 millions sterling, then the distributive 
capacity would become 400 millions sterling. TTithout 
deducting from the incomes which are derived from 
rents, taxes and mortgages, it would double the income 
of the producing classes. 

Every million added to circulation would add one 
hundred millions to commercial circulation, and ten mil- 
lions to the income of national industry. The bank cir- 
culation of Great Britain amounted to 43 millions ster- 
ling in 1815, and the annual value of wealth was then com- 
puted by CoLQUHouN, at 420 millions sterling. Raising 
the standard, current at that time, from less than three 
ounces of silver up to four ounces in th^ pound sterling, 
operated to reduce the bank discounts from 43 millions 
to 80 millions. The summary of these figures would 
produce as follows : — 

Annual production of wealth in 1815, X'420,000,000 

Circulation of bank money, . . , , =...., 43,000,000 






Public and private revenue dravrn from in- 
dustry . gOO,000,00(? 

Balance to the producers 220,000,000 

Annual products in 1840, , jG300,000,000 

Circulation of bank mone}'', , . 30,00t),00G 

Public and private revenues drawn from in- 
dustry 200,000,000 

Balance to the trading and operative classes. . 100,000,000 

Prices raised in 1856 by the operation of gold 
10 per cent — increased production conse- 
quent 15 per cent — has raised the annual 

value to £400,000,000 

Public and private revenue, 200,000. OC'O 

Balance to the traders and operatives 200,000,000 

Foreign exports in 1815, £50,000,000 

being one-ninth of total production. 

Foreign exports in 1840, , . . -£60,000,000 

being one- sixth of total production. 

Foreign exports in 1856, . . » £100,000,000 

being one-fourth of total production, 

Hence 43 millions of .bank issues reduced to 30 mil- 
lions, making a reduction of issues and discounts to the 
amount of 13 millions, arrested tlie circulation of 1300 
millions of products per annum, and destroyed 130 mil- 
lions sterling of tlie income of the producing classes. All 
classes of industry feeling the destructive effects of de- 
clining prices, sought to raise the value of manufactures 
whenever the banks afforded a degree of relief by liberal 
discountages. Operatives combined to raise wages, 
manufacturers demanded better prices, the merchant 
also found in these intermissions of severity, that he had 
less difficulty to get better prices when the banks were- 
liberal in their accommxodations, than to find a market 
at any price in hard times, yielded to the advances, and 
profited by the enlarging consumption. 

In a currency, part hank notes and part specie circu- 
lation is most irregalar, from the continual expansion 
and contraction of accommodation. When the banks 
discount freely business rapidly extends. Trade be- 
comes more remunerative, and the means to meet obli- 
gations more abundant. A few years of activity raise 
large sections of men from a condition of poverty and 



■78 

distress to a state of affluence and reliability- Circula- 
tion of money and of products express co-relativ.,6 pro- 
gress and numerical results. Every interchange of 
produce occasions an equivalent interchange of money. 

As the effusion of money spreads throughout the chan- 
nels of trade, it seems to increase with the accumulation 
of wealth. It is required to perform the work of ex- 
change with greater rapidity as the demands becomes 
more urgent and the transactions more numerous. 
There are more products to circulate and more certainty 
in the returns, and, therefore more promptitude in the 
■expenditure. Circulation substitutes quantity. Money 
comes and goes quicker, but every time it returns it 
bears profit and reward. Abundance of money produ- 
ces activity in trade — -activity stimulates industry — in- 
dustry multiplies the national riches. 

Raise the discounts from three to four per cent., or 
from four to live per cent., and all those branches of 
trade where the profits are low become instantly profit- 
less. Wholesale businesses, where the margin does not 
exceed 2i or 3 per cent profit upon three month bills, and 
who can only realise a paying profit with money at 3 
per cent, will sufi'er an actual loss upon every transaction 
at 4^ and 5 per cent. Orders for goods are im- 
mediately reduced concurently with raising the rate of 
interest. Manufacturers whose profits are also at the 
lowest point cannot undergo a reduction of price to re- 
lieve the wholesale business and to compensate for the 
rise in the value of money, since it will have increased 
in cost to them also, and thus add to the cost of produc- 
tion. Wages being also at the lowest point, an at- 
tempt to reduce this last element has, in the branches 
most wanted, been exhausted in previous interruptions. 

In the fabrics of cotton, profit and wages having 
reached their minimum, while the immense production 
and consumption of the article render it one of the 
largest mercantile branches of business, both in domestic 
and foreign trade, hence the first effect of hi^h rates 
of interest operating with severity on all, depresses 
in the highest degree those departments where the 
widest range of manufacturing business is the least 
capable of withstanding the addiuunal financial taxa- 
tion. The first class of orders witlidi'awn by the 



79 

wholesale merchants discourages the mannfactarers, 
^and labor is immediateiy reduced, to limit the work of 
production- 

Before the bank monej so discounted is withdrawn from 
the hands of the community the circulation is, therefore, 
arrested. Raw materials are not purchased in such 
quantities, or with the usual alacrity. Another depart- 
ment of industry is arrested. Wages having diminished 
with reduced employment, acts directly and indirectly 
upon every class of the retailers, who forthwith refuse 
to make purchases from the wholesale merchants. 
Whenever the merchants cease to be buyers they soon 
cease, by the nature of commercial law, to be sellers. 
Those who have no money cannot buy and those who 
liave cannot employ it. 

Every branch of trade sinks into inactivity upon the 
collapse of one or two leading departments. If the cir- 
culation of each unit of money in a healthy condition 
of business, performs one hundred transactions — raising 
the rate of interest will diminish its circulative action in- 
versely with the rise. Thirty millions, at 3 per cent. 
maxirrbum cirGulation^ will produce 3,000 millions ster- 
ling of business. At 4 per cent a reduced circulation, 
S,000 millions sterling of business. At 5 per cent, min- 
imwm mrculation 1,100 millions of business. The busi- 
ness transactions of Great Britain have been computed at 
ten times the maximum assumed in these calculations, 
if such is the case it would strengthen the principle here 
propounded, since it is known positively the amount of 
money which can be discounted for mercantile and man- 
ufacturing industry. 

The quantity of wealth producible in all civilized 
communities, is the law of quantity purchasable by its 
members. Art and labor have been divided through- 
out the entire organization to supply each class of 
wants according to the capacity of production. When 
labor is interrupted, either from inadequate circulation, 
or an inadequate quantity of money to circulate and 
exchange the products in the hands of the several pro- 
ducers, then aggregate demand is beneath supply in the 
exact proportion that aggregate supply is above demand. 
Every value produced by one trade will cancel an equal 
value produced by another, it human wisdom will 



80 

supply an instrument of capacity equal to the values 

pro3ueible. 

" Money," says " Mr. Geay, '' ie demand, labor is sup- 
ply." It is because a hat is not bought tbat a pair of 
shoes are not sold, or it is because a bat is not sold that 
a pair of shoes are not bought. It matters not which of 
the exchanges takes the precedence, the one would cause 
the demand for the other either way. Multiply this to 
any extent, the law is equally applicable. A million of 
hats must be sold before a million pairs of shoes can be 
bought, and a million yards of broad cloth must be sold 
before a million bushels of grain can be bought, and so 
on throughout the whole circle of exchanges. Should, 
therefore, the quantity of money be equal only to pro- 
duce as fifty to a hundred, then only fifty pounds worth 
of goods can be exchanged or sold out of each hundred 
produced. The quantity of wealth demanded is limited 
to the quantity of money into which it must be ex- 
changed before the producer can make a demand for 
other produce. 

Demand is, therefore, regulated by public law. What 
the plough is to the husbandman, money is to the mer- 
chant. The one is the instrument of production, the 
other the instrument of exchange. Land may be abun- 
dant, and the soil rich, but the fruits of both are mate- 
rially denied to him who has no instrument to call forth 
their riches. So it is with the trader, wealth may be 
abundant, and the capacity to produce unlimited, but 
without the instrument of exchange the wealth produced 
cannot be transferred, distributed and reproduced. Des- 
titution, misery and crime thus multiply amidst the 
abundant elements of physical and moral wealth. 

Without any addition to the current money of a coun- 
try, business may be largely extended. Enterprises 
of a new and useful nature, such as railways, frequently 
call into employment large bodies of laborers. A new 
demand is created for the consumption of goods, by the 
expenditure in this new field of employ. The additioDal 
demand and consumption of manufactures give a fresh 
impetus to manufacturing industry. When the manu- 
factories ?A^Q called into full action, new ones are erected 
to share the profitable business thus opened. Operative 
and mechanical labor is set in motion to an extent not 



81 

previously equalled. Wages are earned and expended 
hj large numbers who had hitherto been a tax on the 
public resources. These new streams of trade acting 
and re-acting upon the middle classes, increase their 
means of accumulation. 

The power to make investments is thus promptly placed 
in the hands of great numbers, who previously were with- 
out money for any purpose beyond their immediate and 
limited necessities. Those who could formerly accumu- 
late, double their accumulations. The projects which 
were sufficiently encouraging to set the industrial 
machine in motioo, when trade was in a state of languor 
and depression, become valuable enterprises, as the 
greater requirement for their use opens "with an enlarged 
and expanding business. 

The savings of the traders flow into the channels of 
those projects which seem not only legitimate, but most 
profitable investments. Every branch of industry re- 
ciprocates encouragement to another. Activity of cir- 
culation in such cases substitutes quantity. Credit 
multiplies with the extending requirements. Money, 
circulating with increasing rapidity, appears to augment 
in abundance. Labor becomes less available than money. 
The capitalists, realizing by every investment, offer ad- 
ditional rewards to industry, and the operative re- 
sponds by working over hours. Human energy seems 
inexhaustible. Every class particij)ate in the riches 
thus multiplied and multiplying by the swift and skil- 
ful hands of national industry. 

Enlarged consumption of home products is accom- 
panied with a corresponding increase of foreign products. 
The demand and consumption by a nation in this ad- 
vancing condition of prosperity, augment in a greater de- 
gree than other nations less active can reciprocate. The 
greater importations throw the balance of trade against 
the lusty consumer. Gold is required to adjust the 
foreign exchanges. The banks cannot spare their 
scanty supply at any time, but especially wheu their dis- 
counts are circulating at the greatest tension. Statute 
law demands they shall hold gold or withdraw their cir- 
culation. The laws of commerce and nature demand 
the relinquishment of the gold held by the banks. Dis- 
counts are raised to discourage enterprise, that con- 

K 



• 82 

snrnptioii may be diminished to secure the re-adjast- 
merit of foreign exchange. 

The largest mercantile firms are the first sufferers 
utidei* this financial operation. Orders are withdrawn. 
Labor is suspended. The enterprises which set the 
whole energies of the community in action, and which 
were absorbing the legitimate savings of the capitalist 
are the first undertakings to be abandoned. ^q\v 
lines of railway, houses, manufactories, machinery, 
ship-building, all in process of erection and construc- 
tion are ^reliuquished for the want of those savings 
which are curtailed by the curtailment of bank accom- 
modation. The banks comply with the law, and 
the law spreads in its operations general ruin, bank- 
ruptcy, and demoralization throughout society. 

Merchants wdio were commended lor their energy 
and enterprise are suddenly reproached as speculators. 
The manufacturer is admonished for his bad judgment 
in having invested so much in the extension of his pre- 
mises and increased machinery. The tradesmen are 
generally reproved for having put their money into 
buildings instead of preserving it in bank deposits. K^ow 
one of two results w^ould take place if the accu- 
mulations of business men, during prosperous times, 
were hoarded in the banks instead of being used in the 
various undertakings which absorb them in their own 
business, or others which they judge equally legiti- 
mate. 

First the banks accumulating numerous deposits would 
lend the money to large capitalists to carry out the enter- 
prises in which the humbler capitalists would not invest. 
By absorbing labor to execute the projects which pre- 
sented the fairest prospect of returns they would mo- 
nopolize all the great works of the country with the 
use of capital sav^d by those who feai ed to adventure. 
The general consumption superinduced would cause a 
corresponding demand upon foreign products exactly 
the same as if the labor was employed, to enrich a mil- 
lion oi investors instead of a few thu)usands. 

Whenever the balance of trade required the curtail- 
ment of discount the collapse of business would drive 
the numerous depositors to withdi-aw their savings from 
the banks, which would be unable to meet their de- 



83 

mands until the sums they had loaned could be returned. 
This, it is obvious, could not be accomplished for some 
time. The capitalists would also find their stocks de- 
preciated with the decline of business and to sell 
would be ruin. Both the borrowers and the banks would 
collapse, and the same ruinous consequences would result, 
with the difference, that the stocks^ huildings^ mcmufaG- 
tories^ and machinery in which the savings of the inves- 
tors had in the first case been absorbed, would, upon the 
improvement of business, ultimately regain much of their 
value, whereas the failure of the banks seldom afford to 
their depositors, after legal expenses are deducted, a 
per-centage worth consideration. 

Circulation thus expands and contracts to preserve 
an amount of gold in the ha/nJcs determined by and de- 
termining their issues of bank notes. To preserve that 
amount of gold, discount must be limited, and the limits 
thus fixed limits trade, the limitation of trade determines 
the limits of employment, and hence the action of the 
law, which makes gold or silver the basis of national in- 
dustry operates as if a permanent decree were enforced 
to reduce the great majority of every civilized nation 
to social vassalage, misery and demoralization. 

Prudence will not conserve the accumulations and 
riches which the merchant has attained, nor give to the 
manufacturer affiuence, however skilful or Irugal, nor 
secure bread to the operative, whatever may be his 
character. The aggregate of one commodity, gold or 
silver^ is the determinator of the aggregate of all other 
commodities. Deficient in quantity — it is, from the 
nature of commercial law incapable of relative augmen- 
tation, while its circulative qualities are also diminished 
by its natural scarcity. These extreme fluctuations 
which are inseparable from the temporary scarcity of 
any commodity, are multiplied beyond computation in 
the case of money, since they operate not less destruc- 
tively on the interests of production, than upon those of 
consumption. 

Moreover, gold is always added to the current medium 
of exchange at great cost. As coin is also non-productive. 
It is so much ca]3ital sunk, merely to circulate other 
capital. Besides it will only circulate a quantity of 
wealth proportionate to it own value. No increase to 



84 

the numbers engaged in the mining of gold inversely 
ever takes place. The laws of all nations discourage 
this distribution of human industry, while the require- 
ments of trade and society necessitate a proportionate 
increase of gold. The quantity of 'vrdue in the product 
of gold — is determinate and limited — the quantity of 
lidlue in aggregate production is indeterminate and un- 
limited — every day adding to the productiveness of all 
civilized communities by innumerable causes. 

A social condition producing so much unnecessary 
and unnatural adversity cannot fail to confuse the cal- 
culations of the most experienced. The standard of 
morality, public and private, sinks in defiance of the 
most heroic sacri rices to sustuin an honorable reputation 
or to command a desirable position. For a consider- 
able period a nation may progress without any additions 
being made to its circulation. Accumulations will still 
be made by some. Competition will, however, become 
more and more intense, while pauperism and defection 
will spread their blighting influence throughout the com- 
monwealth. In such a state riches and property concen- 
trate into fewer hands. The lower classes of the com- 
munity arrested in their efforts to advance, or debased 
by poverty, avoid marriage and thus, in some degree, 
limit population to the limited dimensions of the declin- 
ing industrial system. 

Ancient communities, employing metallic money only, 
moved in a circle of advance and decline with remark- 
able precision. Modern nations, having practically 
employed the agency of denominative Tnoney as w^ell as 
intrinsic money have enlarged the area of industry and 
trade — thus extending the period of decline. Population 
increases rapidly in a nation during its ascent to power, 
even though war, under such circumstances, imj»oses an 
immense drain upon its members. On the contrary 
population declines after it has passed the culminating 
point, though it should become considerably relieved 
from the sacrifices of war, or altogether treed from 
such drain by becoming the province of a superior 
power. 

Population has continued to increase in Britain and 
France amid misery and social declension. Yarious 
causes contribute to encourage populousness in modern 



85 

communities which did not exist in antiquity, Personal 
freedom and equality in all the immunities of civil life, 
prevail now throughout civilization. The humbler classes 
iiaturally multiply faster than the wealthy. Those 
whose destitiitive condition superinduce a decline in 
their offspring are compensated by the increase amongst 
those who have at least sufficient subsistence to sustain 
their robust constitutions, strengthened by their robust 
habits of industry. Social impediments to increase are 
also mitigated by political provisions in some nations, 
by economical eonsiderations in others. Sentiments of 
humanity have become stronger than the arm of 
govermental authority. Populousness cannot now be 
diminished by the rude agency of war. Princes or sta- 
tesmen who cannot substitute wisdom for policy will not 
long retain their thrones or honors. If the oppressed 
multitudes cannot construct they can destroy. The ele- 
ments of revolution, therefore, increase with the pro- 
gress of numbers under the defective arrangements of 
the existing political system. 

France provides for the reception of infants in public 
institutions. In Britain a i>ractice has long prevailed 
amongst the employers, when trade is depressed of plac- 
ing their workmen upon half or quarter time. By this 
process of distributing labor, multitudes are still pos- 
sessed of some means to obtain bread, hence the j)ower of 
increase remains undisturbed, while the oppressive in- 
crease of poor-rates are considerably modified. Au- 
thority seems impotent before the multiplying power of 
the masses. Legislative and economical science unfold- 
ing and widening the avenues of employment, can alone 
command submission, and confer security upon the estab- 
lished interests of society. 

Participating in the present prosperity and enjoying 
greater means of comfort, the people of Europe will be- 
come more impatient of poverty upon the recurrence of 
commercial depression. To rely on the enlarged circula- 
tion of the precious metals for the extension of trade is 
not less fatal to the safety of states, than if a navigator 
trusted to the drift of a current in bringing his vessel to 
the point of destination. Should a depreciation take 
place, the proportional Aalue of the metals to the 
requirements of trade will l)e suddenlv diminished. 



86 

Cheapened in current exchange by their abundance, 
they will become less profitable in production when 
their requirement will have been augmented to a de- 
gree hithero unknown. 

First. — The advanced price of property and products 
will require a greater quantity to sustain their new "odlue. 
Secondly. — ^The enlarged mercantile operations, both 
domestic and foreign v/ill require the continuance and en- 
largement of the supply ; and, thirdly — the augmenting 
and multiplying populations throughout the leading civil- 
ized communities will require a proportionate increase of 
coin to compensate their industry and sustain their 
greater expense of living. Every fraction added to the . 
average value of commodities is deducted from the value 
of gold as a comm^odity. Every deduction made upon 
the value of gold is a deduction made upon the value 
of the mines from which it is produced. K the j)roduc- 
tion is reduced, the deductions made upon the annual 
supply will operate to paralyse the efforts of trade and 
industry, raised upon the force of its abundance. 

"When grain is cheap it affects only its own price. If 
wheat, in an abundant year, caused the rise of all manu- 
factures, the farmer would rise the price of grain in sub- 
sequent years, even when the crops were comparatively 
abundant since all that he consumed of clothing, furni- 
ture, and implements of husbandry had risen relatively 
to the price of his produce. On the contrary, the miner 
cannot raise the price of his gold proportionately to 
the advanced prices of commoditieSjSince the law of all 
nations have determined the capacity of this metal in the 
discharge of debt. In exchange, it may sink in capacity, 
but cannot rise. A depreciation of its value, therefore, 
operates to diminish the supply, and when depreciated 
the denomination of all dehts^ obligations ^\\([ property hav- 
ing been raised, no community can relinquish the new 
standard of prices without relinquishing, in the same de- 
gree, their property, augmenting their debts, and in- 
creasing their obligations. 

Circulative capacity and supply in the commodity of 
gold are subject to irregularities which no legislation 
can coiTect. In a semi-barbarous condition, where laws 
are feeble and life not less insecure than property, me- 
tallic money is indispensable to carry through tlie limit- 



ed transactions of trade. It is also nseful in tlie hands 
of tlie merchants of the more civilized nations in their 
dealings ^vith the less civilized, such as the extending 
intercourse with the Asiatic and African races; also 
with the Indian and Esquimaux tribes in various articles, 
as furs, &c. Many simple articles of manufacture can be 
employed with equal success. Even the former have 
considerably supplied the commodity w^hich may be 
used to traffic with them. But the use of gold amongst 
a people where authority guarantees security, and where 
intelligence hourly multiplies the agents of production, is 
an error of modern statesmanship, which inverts the 
civilized economy and renders the elements of human 
felicity, frequently instrumental of wrong, and always 
inequitable in their administration. 

In every community the circulation of income is one of 
the most determinate provisions of the social state. 
Incomes from wages, profits, rents and public sal- 
aries are paid at stated times. The custom which pre- 
vails in this matter will, probably, not be disturbed for 
centuries, hence the distribution of income, and its circu- 
lation, in all established countries is not less definite than 
the laws of exchange. Wages are paid weekly, and 
therefore the income of the operative circulates fifty-two 
times yearly. From the accommodation of credits the 
complement of income amongst the trading class is only 
made up every three months, hence their expenditure 
circulates but four times yearly. Land proprietors, the 
more wealthy capitalists, government annuitants and 
others pay their bills only at the close of each year, and, 
therefore, their expenditure circulates but once yearly. 
Wages circulate with great activity. Profits circulate 
tardily. Kents, dividends, and salaries more so. The 
frequent expenditures of the working class enable the 
tradesmen to reciprocate with each other quarterly cre- 
dits. It is these intermediate spendings which sustain 
the means of every order of business men to accommo- 
date their richer customers with credits suitable both 
in amount and extent of time. 

Any measure which interrupts and diminishes the dis- 
count of money operates only on two classes of income, 
take any country, say Britain. Should national income 
be divided as follows : 200 millions sterling for fixed an- 



88 



tiuities from lands and funds — 100 millions the profits of 
traders, and 100 millions wages. A curtailment of bank 
disconntage, from whatever circumstance, abridges the 
mercantile operations of the merchants and consequently 
abridges the employment of labor. ]^o diminution can 
take place of the incomes secured under legal contract 
and provisions. The income of the middle and operative 
classes alone suffer. Limiring discounts ten per cent., 
and inferentially assuming that employment would only 
be abridged in that degree, then ten per cent, of ag- 
.o;regate production Avould be curtailed. This w^ould 
amount to 40 millions sterling. Dividing the loss be- 
tween those classes who would be affected, each would 
sustain a loss of 20 millions in their aggregate income. 
200 millions would be reduced to 160 millions of indus- 
trial income, while the 200 millions sterling of income 
of the others would remain undiminished. 

In proportion as discounts are abridged, an abridgment 
of industry and the income of the industrial classes 
thus proceeds inversely. The continued recurrence of such 
interruptions to trade, in all commercial nations, is a 
reproach on civilization, and a wrong inflicted for which 
no redress can ever be procured. Even the progress of 
a nation and the means of accumulation depend more 
upon the regularity of its industrial efforts than the 
greatness of its productive agencies, ^ew colonies show 
this vital progress. So long as barter can be practised 
the interchanges of industry, almost unaided w4th ca- 
pital or machinery, advances with such certainty that 
there are scarcely a member of such a community but 
accumulates property and acquires competency. M^h 
fly from the seaboard cities of the United States to the 
western confines, that they may realize a security of em.- 
ployment which the instrumentality of c«j;/Y«/5, ^?i<^??c^ 
and science have yet failed to produce. 

Upon the principle tliat a reduction of discounts 
abridge national wealth and the income of national in- 
dustry, the opposite effects would be produced by an 
enlargement of discount. The resources of a country 
are determined by the industry and number of its in- 
habitants. While any portion remain unemployed or 
partially employed, the public resources are, in that de- 
S"ree ami extent neplected. Those who are destitute of 



glfC rtJlVi CM CIA U li^gi 



89 

t 

employ, not only contribute nothing to the national 
wealth but they are a tax upon the means of others. An 
increase of discounts to the amount required for the per- 
manent employment of a multiplying people would an- 
nually enlarge the income of every one engaged in a 
productive capacity. The gains of the laborer invariably 
carry with them an equivalent amount to the trading 
class. Every pound sterling^ dollar cr franc earned in 
wages contributes an equal amount, at least, to the pro 
■fits of those who direct the industrial energies of the 
several communities. 

An annual increase of population at tlie rate of one- 
and-a-half per cent, as in the case of tlie British Isles, 
or even at a greater ratio, as in some countries, requires 
an additional discountage at least in this degree. To 
depend upon the irregular circulation of coin is perilous 
to the security of society. To restrain the discount of 
notes upon any theory which conflicts with the multiply- 
ing requirements of the people is equally fatal to the 
public safety. If issues do not increase, credit w^ll mul- 
tiply to facilitate the operations of capital, and hence the 
slightest curtailment of bank discount will operate upon 
the volume of commercial credit proportionately to its 
magnitude. If 30 millions of bank circulation sustains 
a circulation of Vdls of exchange to the extent of 1 mil- 
lion to 50 millions, then the total instrumentality of 
credit will be 1500 millions. Enlarge the volume of 
credit as 1 to 100, and the bills of exchange drawn for 
current trade will be 3000 millions. To withdraw 1 mil- 
lion sterling of bank discounts in the first instance, would 
destroy 50 millions sterling of commercial transactions — 
2 millions withdrawn would destroy 100 millions of 
commerce. In the second case, 1 million of circulation 
withdrawn vv^ould reduce credit 100 millions — -2 millions 
withdrawn would reduce it 200 millions, and so on in- 
versely. 

What is the capacity of Bills of Exchange in perform- 
ing the functions of money is not easily defined. It is, 
however, a principle of great importance. Credit ma- 
tures, according to the term of these bills, generally in 
three months. Assuming the commercial credit cur- 
rent at 900 millions sterling — this amount in 90 day 
bills would be totally canceled and an erjual credit dur- 



90 

ing each 90 days in eacL year. An equal portion fall- 
ing dne daily would require the use of 10 millions of 
pounds sterling to cancel each day's liabilities. The 
amount of current bank issues would thus be totally ab- 
sorbed every three days, or in one-thirteenth of the pe- 
riod of maturation. I'o dispense with domestic Bills of 
Exchange altogether, by substituting bank notes of a 
detenninate denomination w^ould probably require an is- 
sue equal to one-tenth of current credit. Upon this cal- 
culation 90 millions sterling would be required. Bills 
of exchange are, therefore, now performing the office of 
law^ful money equal to two-thirds the necessary circula- 
tion. Thus 10 millions of current credit would be equal 
to 1 million of bank issue. A standard of issue based 
upon the laws of value would demonstrate the actual 
capacity of credit in discharging the functions of money. 

Where a system of credit so complex and vast has 
been raised to sustain the enterprise and industry of a 
people, it is easy to imagine the precaution which every 
capitalist must exercise to secure himself against ruin. 
The withdrawal, of the least amount of circulation by 
the banks, or even the apprehensionof such, is a menace 
of bankruptcy. Each merchant limits his business and 
credit to the possibility of such an occurrence. The labor 
in the market is demanded only in accordance with the 
prudent limits of the merchant. Multitudes of unemploy- 
ed laborers become dependent on charitable provisions. 
Those wdio have means emigrate. Others sink into 
habits of indolence and demoralization. The entire 
number compete with each other by underselling — the 
unsuccessful frequently resorting to fraud, and the crafty 
to every species of debasement to procure bread. 

The quantity of coin taken out of circulation by hoard- 
ing at one time, may be added at another, as w^as the 
case during the South Sea scheme in England, and the 
Mlssissijypi scheme in France. The amount of m.oney 
brought out of hoard w^as immense. Coin is withdrawn 
from circulation slowly, and reaching o,ver a great series 
of Years. It is tlien thrown into current use in large 
Quantities, producing an extraordinary stimulus in com- 
mercial enterprise and national industry. Legitimate 
undertakings do not oifer sufiiciently extravagant gains 
to the hoarders, who are generally not le»s avaricious 



91 

f 

than fragal. If, however, there is little wisdom or gain 
in hoarding, there is less in the manner in which thev 
make an adventure of their savings. 

The prosperity of the French people during the reign 
of Louis Phillippe, afforded largely the means of hoard- 
ing. The concurrent evils to trade by a scarcity of coin, 
contributed, in no small degree, to the depression of in- 
dustry. Circulation thus limited, the means of employ- 
ment and subsistence, especially in the cities, were con- 
tracted to an extent which rendered discontent and 
defection so universal, that a single act of indiscretion on 
the part of the government became the signal of revolu- 
tion. That event ensued, accompanied with calamities 
which soon rendered the new form of government less 
popular than the institution of monarchy. As the hoard- 
ings of the people were expended from necessity and 
thrown into circulation, a general subsidence of the so- 
cial chaos began to manifest itself. The bank of France, 
the great financial reservoir, which for a time was drain- 
ed, gradually received from a million streams of private 
expenditures the secret and indolent accumulations of 
coin. Trade slowly resumed its ordinary course. Em- 
ployment increased with circulation. The new resources 
of California operated concurrently, inspired commercial 
confidence, and has continued to sustain the activity of 
circulation, although the practice of hoarding is carried 
to an extent now, probably, greater than at any former 
period. 



CHAPTER XI. 

THE ORIG-IN OF NOTES — THEIR ADVANTAGES TO COMMEEOE 
DIMINISHED BY GOVERNMENTAL INTERFERENCE. PROGRESS 
OF BANK ISSrES. 

In the early part of the ITth century when inter- 
course with the continents of America and of Asia was 
opened the adventurers who returned from voyages to 
these parts generally brought more or less gold. It wa^ 
not convenient for the 2;oldsmiths always to purchase 
the hullion thus offered for sale. The goldsmiths of 
London in the same manner as the bank ot Amsterdam^ 



gave certificates to any one who preferred to deposit 
treasure in their hands. Their well-known riches and 
the great danger of transferring so valuable a commodity 
at that period, naturally suggested a trusteeship so 
safe and convenient. 

These certificates or warrants of demand for 'calue thus 
deposited, seems to have suggested the still more 
important advantages of using them in commercial tran- 
sactions. The convenience, safety and facility with 
which they performed the functions and office of money 
multiplied the demand for their accommodation. It 
is said that several millions of these certificates^ or ra- 
ther warrants^ were circulating in tlie English capital at 
the time of the Commonvrealtli. One thing is evident, 
that during all the political vicissitudes through which 
the metropolis passed, there appeared no interruption to 
its industrial and commercial progress. It seemed, in- 
deed, to suffer less tlian the provincial cities. 

Cromwell raised large revenues without public com- 
plaint. ^0 popular disturbances periled his authority, 
rlow much the operations of commerce were facilitated 
with these new insti timents of exchange^ or to what ex- 
tent employment w^as multiplied, there is no means of 
estimating. Yet the increasing population of the capi- 
tal w^ould indicate, that the inducements of labor were 
encouraging. Certificates first issued upon deposits, soon 
led to certificates issued upon the credit of the gold- 
smiths^ whose well known riches were undoubted secu- 
rity. The form was preserved on which they originated, 
and is still preserved in the form of all bank notes, 

A depositor who consigned one hundred ounces, troy, 
of gold to any of these tradesmen, received a warranty 
acknowledging the value, and authorising the payment 
of the amount on the demand of the holder. 

[foem.] 

London^ May 1st. 1660. 

I promise to jpay on demand the sum of FOUR HUN- 
DRED POUNDS sterling, £400, to Alexander Wright, 
01' hearer, 

Mathcic Orton, 

Goldsmith, 

Lomlai'd street. 



, 93 

If the deposit was iOUO ounces of silrer at 4s, lOicf, 
per ounce, omitting fractions, which has been invariably 
done throughout this work, where the principle could be 
eliminated without — the order would be as follows : 

City of London^ May 1st, 1660. 

Ijpromise to pay on demand the sum of TWO HUK- 

DEED and TWO POUNDS sterling, £202, to Alexa7ider 

Wright or hearer, 

Mathew Orton, 

Goldsmith, 

Lomnhard street. 
« 

Notes bearing denominations of this, or any other, 
amount, would relieve the coin, both gold and silver, 
from the business of exchange. Accumulations of specie 
in large sums would cease. As these notes came into 
more general use, all transactions of considerable mag- 
nitude would be cancelled by their instrumentality. 
The coin thus relieved from the w^ork of exchange would 
flow down to the channels of distribution. There would 
be less difficulty in obtaining coin for the payment of 
wages and the performance of the innumerable transac- 
tions of small denomination. Both the manufacturers 
and retail tradesmen would thus immediately partici- 
pate in the facilities acquired by the merchants. Money 
would become more abundant concurrently with an in- 
crease of orders for manufactures. Money multiplied 
trade, and trade multiplied profit. 

Aiding the progress of trade, and multiplying with its 
requirements, the importance of this new financial ele- 
ment attracted the attention of the British government. 
To relieve the embarrassments of the public treasury, 
the goldsmiths w^ere ofiered terms for a participation in 
the privileges, which had contributed so much to the 
interest of commerce. The charter of incorporation 
granting the legal power to issue notes which had hith- 
erto been exercised without interruption under the exist- 
ing laws, accorded rights which had never been ques- 
tioned. On the contrary, the charter abridged the pri- 
vate right of issue, and thereby gave a species of gov- 
ernmental securitv to the notes so issued, as if thev were 



\)4 



vquivdlcni tu coin. Wlioii issued by a pi-ivato citizen, 
llie solvency and probity oi' the issuer M'as a matter of 
certainty. WlieneNcr the note waw ofiered in payment 
and accepted, the cliaracter, resi)onsil)ility and substance 
of the name it bore were understood. But issned by a 
com]">any whose only guarantees were a charter, of en- 
dorsement by the soverelgu that the bank was legal, 
gave to such institutions the apparent importance of 
wnunercial minfft. 

Even the conditions upon which tlie first charter was 
granted bearing the title of the Bank of England were 
in absolute violation of the security of the notes issued. 
A loan was contracted to be paid to the government from 
the issue department, not from the deposits or accumu- 
lations either of the company itself, or those of its 
customers. Issues oi' private notes were discounted to 
be repaid in three or six months They were advanced 
to aid and multiply production. Every additional pound 
note discounted, increased the denumd for labor, and 
added to the ju'oductability of the mition. It represent- 
ed an accumulation equal to or greater than its denom- 
ination. 

Notes issued to be loaned to governmont were not to 
be repaid. They thus become a record oi funded deht. 
Issues so advanced were employed entirely for expen- 
diture and consumption. They were issued to con- 
sume and diminish the accumulated wealth of the na- 
tion instead of adding to ag^gregate capital. All is- 
sues for mercantile pur})oses of necessity were borrow- 
ed to be paid. What the merchant bought and sold re- 
produced his investment with profit. Increase of cur- 
rency was the index of the aggregation of capital. 
Loans discounted to the government added to circula- 
tion, but not to ihe wealth of the countiy. They added 
to prices instead of to produce. 

The nature of these notes i'ov commercial puiyoses was 
entirely revoked by legislative interference. It restrict- 
ed and abridged the individual rightof the most respect- 
able citizens to exercise this immunity with protit to 
themselves and advantage to the industry of their neigh- 
borhood. Instead oi' a broad distributitui oi' the right to 
accommodate, it invested a power in corj)orations whose 
issues were a species o\' i)KMu>j>oly, and whose capital 



95 

was beyond the public scrmtinj. It is the small and 
nuraerous discounts made to tradesmen which renders the 
large absorption of notes practicable without affecting 
their value. Large discounts operate immediately upon 
masses of products and occasion a rise of price. Small 
discounts contribute to the means of production and 
augments the stock of wealth instead of increasing the 
price. They sweil the volume oi supply instead of inflat- 
ing the volume of price. They operate to cheapen in- 
stead of making dear. They multiply income amongst 
the frugal instead of encouraging extravagance amongst 
the fortunate gamblers of commerce. Fifty are accom- 
modated with limited discounts in the United States for 
one who can enjoy this privilege in Britain. A si- 
milar practice prevailed in Scotland until the British 
Parliament interfered and enforced that the Scotch banks 
should hold bank of England notes against their issues. 
Government interference was occasioned by the bank- 
ruptcy of the Treasury. Discounts to the ' state were 
employed to consume not to multiply, to deduct not to 
augment the stock of national wealth. Notes issued and 
advanced to the state bearing no intrinsic value, yet re- 
presented legally a determinate quantity of gold. These 
advances were not employed to produce any value or 
to fabricate any articles by which gold could be pro- 
cured, or to replaoe the gold which might flow out of 
the country. Iheir denomination was added to circula- 
tion. The current value of the notes separated from 
the natural value of the coin. They would not circulate 
together. The nature oi notes is to sustain current prices 
and multiply unlimited exchange — the nature of gold or 
silver coin is to degrade current prices and limit ex- 
change. The conflict in the operations of these oppos- 
ing laws is ruinous to commerce. Oscillation and con- 
vulsion become a rule in trade. 

Notes issued, therefore, under the tamperings and in- 
dulgencies of governments have invariably depreciated. 
So far Irom the mercantile classes in Europe causing 
the debasement of the value ot bank issues, it may 
be safely asserted that the competition, inseparable 
from trade and the scru])ulous exactness upon which 
discounts are made, tends always to reduce the price of 
products rather than diminish the value ©f money. 



^)6 

Such has been the pressure of government demands upon 
the bank of England at vai ions periods, that a debt has 
been contracted amounting to eleven millions sterling. 
This is equal to one-half her present issue. A forced cir,- 
culation thus made from the issue department would 
seem to aggravate the injustice of parliamentary inter- 
ference to raise the value of money — which its own ex- 
cesses had, in a great measure, specially caused the de- 
preciation. 

The banks being compelled by law to give a definite 
weight ot gold or silver on demand to the holder of their 
notes, have found themselves involved from time to time 
in responsibilities to the public which they could not meet. 
Whenever the conventional price of products rose above 
the natural price, the separation of the value of coin 
from the notes caused a continuous drain of gold from 
their vaults. Superinducing by their issues a higher 
range of prices a premium was thus offered to the for- 
eign merchant to bring the products of other countries 
into the market where prices were high and the demand 
encouraging. There was no difficulty for the importer to 
pay, even when there were no bills on 'Change against 
the nation from which he purchased, as he could carry 
to hanh the money he had obtained for his goods, and 
demand gold according to his requirements. 

Every note of one hundred pounds sterling is a war- 
rant of demand against the bank for 25 ounces 300 grains 
of gold, or a note of one hundred dollars is a warrant of 
demand against the bank for 85 ounces 450 grains of 
silver. An advance of 5 per cent on the current price of 
products by an increased issue of notes is a premium of 
5 per cent upon the exportation of gold and silver, as it 
can command this much greater value in all other coun- 
tries where no alteration has taken place. 

If a nation had no foreign trade the legal equivalency 
of coin and notes would produce no inconvenience. 
Either might discharge the same liabilities, and their 
commercial equivalency could scarcely be disturbed. 
But a nation with foreign trade, and especially nations 
of extensive commerce, cannot indulge in a theory which 
becomes destructive to their interests both domestic and 
foreign. There are no legal equivalents between nations. 
Commercial eg'tdvalents alone mile in the transactions 



97 

between countries. The persistency of civilized states 
enforcing a single standard for foreign and domestic 
trade, subjects their respective communities to periodical 
bankruptcy, and interruption of industry. Seasons of 
unforeseen calamities recur, producing in the misgovern- 
ment of human affairs, evils which prudence cannot re- 
sist, nor frugality avert, contrasting the wisdom of the 
Divine Lawgiver, whose blessings are multiplied by the 
economy and distribution of the elements. Winter 
comes to the fortunate, a period of repose The over- 
flowing fulness of summer and autumn muniiicently 
till the farm-yards and granaries with human food. The 
emporiums of trade teem with clothing and luxury, 
while the season of storms advances in her cycle, like a 
lusty and capricious bride laden with the gifts of divine 
benificence, and bearing the costly presents of thrifty 
industry to make a jubilee in each returning year. Con- 
vulsions in trade reverse the laws of order, and overwhelm 
society with destitution and ruin amidst the means of 
limitless abundance. 

Although it has been allowed argumentatively that the 
balance of foreign exchange is thrown from adjustment 
by the increase of prices consequent upon bank issues, 
such is not the practical cause. Prices may remain un- 
affected and yet the balance will become adverse. An 
enlargement of discounts generally takes place after a 
season of interruption, multiplying transactions, rather 
than increasing prices. As the demand for labor rises 
the general means of consumption enlarge. Imports in- 
crease to meet the demands of consumption. No rise in 
domestic products may take place. The issues of notes 
may be absorbed without any manifest alteration of 
price. Consumption increasing in one nation more 
rapidly than in another the balance of exchange is thrown 
against the more prosperous community. Gold is then 
required for adjustment. If imports increased in price 
proportionately to the adverse rate of exchange, exports 
would be encouraged and adjustment would take place 
without the intervention of measures which operate 
rather to limit consumption than operate upon prices. 

To regulate foreign trade, and control the balance of 
exchange, the industry of every civilized community is 
from time to time prostrated, under the laws which now 

M 



98 

prevail. These laws seek to administer the principle that 
coin is the hasis and medium of circulation. Coin^ on the 
contrarj', became a subsidiary medium from the moment 
that banking issues operated upon the interchanges of 
foreign commerce. Ceasing to be a basis coin ought to 
have been dealt with as Sl commodity and charged for ac- 
cording to its price when required for the adjustment of 
trade. Bank issues having become the basis w^ould thus 
have remained undisturbed, facilitating and extending 
domestic industry. The progress of issues according to 
the returns of the Bank of Engla7id Qxhihit the impolicy 
and tampering which has taken place in the regulation 
and discounts of that institution. 

Year. Circulation. Gold. 

nT8 X7,440,000 jC2,000,000 

1779 9,012,000 3,711,000 

1780 8,410,000 13,581,000 

First reduction of bank issues to regulate foreign exchange, 1784. 

1785 5,923,090 2,740,820 

1790 10,040,540 8,633,000 

1795 14,017,510 6,127,120 

Cash payments suspended in 1797, by order in council, and issue of 

one pound notes. 

1800 16,844,480 6,144,250 

ISO,*} 17,871,170 5,883,800 

1810 21,019,600 3,501,410 

1815 27,261,050 2,036,910 

Cash payments restored 1819 — notes of one pound sterling withdrawn. 

1820 23.484,410 4,911,060 

1823 18.392,240 10.384.230 

1825 20,753,780 3,769,100 

Re-issue of one pound notes in 1825, to save the nation from general 

bankruptcy. 

1830 20,050,730 9,161,000 

1835 17,100,500 6,726,000 

1840 15,797,000 3,244,000 

Temporary suspension of the bank charter, by order in council 1847. 

1850 18,825,904 15,944,813 

1855 17,900,000 10,532,494 

In 1784 the Bank of England reduced its circulation 
from 9 millions sterling to 6 millions to restore the gold 
flowing from her vaults. So insupportable was this mea- 
sure on the productive interests of the country that 



99 

the Diinisters were compelled to release tlie bank from the 
strict administration of its charter. A second restric- 
tion was found necessary to prevent the efflux of gold in 
1793. Mercantile ruin and the suspension of employ- 
ment throughout the manufacturing districts alarmed 
the British Government — revolution in France and an 
inevitable war were pending. Destitution and defection 
were not the elements to carry the nation through a 
crisis which threatened the subversion of immemorial 
and established rights. The ministers in council 
decided promptly that 5 7mUions sterling of Exchequer 
Bills should be discounted to the merchants of Lon- 
don to substitute the bank money which had been with- 
drawn. Accommodation was to be advanced liberally 
and without very strict inquiry into the security of the 
applicants. Only S millions and a-half were applied for. 
Every merchant and tradesman witnessed with satisfac- 
tion the solicitude of the state. Confidence was con- 
firmed and the operatives resumed employment. 

A¥ithin a very short time the whole amount taken up 
was honorably repaid. On the authority of Mr. Thorn- 
ton, at the time a member of the British Parliament 
the entire sum was collected. \ti 1797 it was found ne- 
cessary again to curtail circulation to preserve the gold. 
An order in council directed the suspension of the obli- 
gation of the bank to discount gold on demand for its 
notes. This order was judiciously accompanied with a 
measure of moral importance that displayed the eminent 
statesmanship which at that period guided the councils 
of Great Britain. It was ordered that a document should 
be submitted for signature to the merchants of London 
for approval of the act. Ihousands appended their 
names thus endorsing the sagacity of the measure and 
the solvency of the bank of England. To prevent alarm 
among the operatives, the middle classes circulated 
at first, the one pound notes issued, only in their trans- 
actions w^ith each other 

An attempt was made in 1810 to restore the payment 
of the notes on demand^ but the oppression on trade was 
so severe that the government had again to relinquish 
the measure and advance the use ot Exchequer Bills. 
After the close of the I^apoleonic war the British Govern- 
ment finally resolved on the restoration of the traditional 



too 

standard of weight in the coin of the country. In ISW 
the act was carried into effect. It had been hypotheti- 
cally ur^-ed by Dr. Adam Smitli that iiotes hes^ring a de- 
no77iination of not less than £5 sterling, might be circu- 
lated without disturbing the value of the gold. Guineas 
and half-guineas being the highest denomination of coin, 
it was inferred that notes of five pounds bearing the de- 
nomination of nearly five times the denomination of 
the first, and ten times that of the second, would not 
be affected. 

The new statute altering the practice of issue and dis- 
count which had prevailed in the Bank of England for 
twenty years of war and of extraordinary financial expen- 
diture, contained two organic provisions abrogating en- 
tirely the the Banking management of that period. First 
enforcing i^pon the bank tlie payment ©n demand of its 
notes at 33 per cent, more gold than the value which 
they bore in current and commercial use. Secondly the 
extinction of all notes of less denomination than £5. An 
act of national injustice was thus aggravated by the ac- 
companiment of a financial experiment. To the reduc- 
tion of prices from 50 to 60 per cent., was added the 
difticulty of obtaining money of a denomination suitable 
for the payment of wages and the innumerable transac- 
tions ol one^ two^ three and four pounds sterling. 

Instead of a well distributed discountage of notes by 
citizens of substantial means, such as had originated 
these invaluable accomodations to the interests of trade, 
we find the incapacity of regulating beneficially their dis- 
countage by legislative direction. Commercial enter- 
prises, stimulated at one time by excessive issues to un- 
dertake the most gigantic pj'ojects, are suddenly arrest- 
ed by the curtailment of discounts and overw^helmed 
with ruin. The accumulations which are invested and 
the industry expended to render the investments profit- 
able disappear in the convulsive execution of statutes 
which have made economical theories j>aramount to hu- 
man interest. 

Taking the oscillations of bank issue as subjoined, 
it is evident that corresponding revolutions in trade 
must have })rostrated both individual and national Yfi- 
sources to an extent beyond the power of statistical " =*- 
search : — 



1(11 ^ 



BANK OF ENGLAND CIRCULATION IN 
1779 JE:9,013,610 



1784 


6,202,760 


1795 


14,017,510 


1797 


9,674,780 


1800 


16,844,470 


1815 


27,261,650 


1825 


19,092,095 


1840 


15,797,000 



Circulation seems to have touched the lowest point in 
1840. The enforcement of similar principles in the United 
States have been attended with similar consequences. 
Taxation not being over one-fifth of that of Britain, and 
the public lands being open to the people, oscillations in 
bank issues have not been attended with the same extent 
of misery and interruption. There is besides, a progress 
in the extensive discountage of money more conformable 
to the interests and requirements of the people, than to 
the theoretical basis embodied in the statutes upon which 
the charters are conceded. 



Year. 


No. Banks U. States. 


Circulation, 


1790 


4 


$2,500,000 


1800 


28 


10,500,000 


1810 


89 


28,000,000 


1820 


308 


44,800,000 


1830 


329 


61,000,000 


1840 


907 


107,000,000 


1843 


607 


58,000,000 


1846 


720 


90,000,000 


1850 


824 


105,000,000 


1854 


1208 


131,000,000 


1855 


1306 


204,000,000' 



It is computed by the latest returns, that the total 
value of property in the States is 8000 miUio7is of dol- 
lars. There is upon this estimate a cii'Giilation of 1 
million of bank issue to 40 millions dollars of productive 
property. ^ To conduct the operations of this immense 
capital efficiently and profitably, a discountage of not 
less than 1,000 millions of dollars of bank accommoda- 



102 

tion would probably be requisite. Every transaction 
might thus be done in cash, instead of the vast and 
dangerous extent of credit which is required to render 
this capital advantageous. Such an issue could not take 
place under the existing statutes without an unlimited 
depreciation, as the standard bears no natural or perma- 
nent relation either to the value of products or national 
resources. 



CHAPTER XIL 

A STANDARD OF VALUE. ITS DISTINCTION FEOM A DENOMINA- 

TOK OF VALUE. 

Every product bearing an established value or price — 
is a standard of value. Standard implies something de- 
terminate. Commodities the least subject to fluctuate 
are, of course, the most suitable for this purpose. The 
relative value of 3i product to itself at different periods, 
and its relative value to other products being uniform 
and determinate, render it a reliable measure to estimate 
the value of all other commodities, and compute jnstly 
the claims and obligations contracted amongst men in 
their industrial relations. Yet a product, though capable 
of fulfilling the functions of a denominator of value, and 
a determinator of the equity of debt, it could not under 
the nature of economical law, become a proper instru- 
ment to exchange the multiplying products of labor, or 
to cancel the increasing liabilities of civilized commu- 
nities. 

An ounce of silver and a bushel of wheat exchange 
upon an average of years, and are, therefore, equivalents. 
These commodities having an established and deter- 
minate relation of exchangeable value, are standards by 
which other commodities can be measured with accuracy. 
A mortgage of one hundred years standing could equit- 
ably be estimated and canceled by expressing the claim 
in equal figures. Payment of one thousand ounces of 
silver, or one thousand bushels of grain in an average 
year would be equally just, and of full satisfaction. 
It might be more convenient to receive silver than grain, 
but not more equitable. If one thousand certificates, or 



103 

one certificate denominating the numerical value were 
given in payment, it might be more convenient to both 
debtor and creditor, and not less equitable. 

Silver is a more suitable standard than grain, as its 
current value is more uniform, though not more deter- 
minate. The price of grain rises and falls according to 
the nature of the seasons. A bushel of grain when dear 
has cost no more labor — nor a bushel when cheap has 
cost no less labor than would be expended when the 
production was an average. The same labor is bestowed 
when the yield is bad, as when the yield is good. In grain 
the result differs each year, though not on an average 
of years. In silver the result does not differ. The same 
expenditure of labor will produce the same yield of 
metal, and the price, therefore, seldom, and in a small 
degree, ever changes. 

It is also costly to store grain when very cheap, so as 
to preserve it for a subsequent year, and better prices. 
There is no cost in the preservation of silver. The total 
product of grain each year is the total consumption of 
each year, either by the greater consumption in bread, 
or by employing it in the feeding of cattle, and thereby 
increasing the product of animal food. The extreme 
fluctuation in the price of grain is, however, more inci- 
dental than natural. Should the condition of society 
ever afford a greater means of accumulation amongst 
the farmers the cost of preserving the product of super- 
abundant years, and thus carrying forward the balance 
would give a uniformity to prices which their present 
necessities render impossible. In such a case, instead 
of diverting the surplus to the feeding of cattle, and, 
thereby cheapening their animal stock probably in as 
great a degree as they calculated, to compensate them- 
selves for the low price of the grain, they would limit 
their next year's investment in that article, and expend 
proportionately more labor upon the production of those 
articles which prospectively would command a better 
return. 

]^otwithstanding these considerations, grain does not 
appear to constitute so certain and equable a standard of 
value as the useful and precious metals. To construct 
a determinate and uniform standard of value, several 
products must be employed. Taking gold, silver, copper 



5iiid iron each as a unitary value, and the others as rela- 
tive values to them, the denominative capacities of such a 
standard vvould render the operations of exchange as 
definite in their laws as the most exact branches of sci- 
ence. A properly authorized legal warrant or instrument 
bearing the insoription of value of these commodities, 
and expressing its own denomination would fulfil the 
multiplying functions of money with a degree of accu- 
racv and amplitude which no commodity conld perform. 
Under statute authority the issues of such warrants by 
banking corporations w^ould not afi'ect their value, as the 
discountage w^ouid be regulated by the public require- 
ments, and not by the decision of bank directors, or re- 
straints of law. 

Money is a legal and conventional capacity. The in- 
strument may be copper, or gold, or silver ov pajper^ 
as the law shall determine and direct. It may denomi- 
native or intrinsic. It may be a tohen of value or an equi- 
valent of value. The exigencies of the state and the re- 
quirements of a community are the purposes for which 
money is instituted, and that quality of money which is 
the most convenient to the uses of a people is the most 
politic and beneficial to their interests. To employ a 
product of value as an instrument of exchange is not 
buying and selling but bartering. The law in directing 
that gold or silver should be specially and the only legal 
instruments to cancel debt, shuts out a thousand means 
by which men could employ the accommodation of a more 
convenient and extended process of barter. The difiiculty 
to obtain gold and silver for the enlarging operations of 
business called forth the inventive skill of the trader. 
Merchants introduced the use of hills bearing the denom- 
ination and acknowledgement of a liability. Notes of 
of exchange suggested a new principle of money which 
performed ail the offices of circulation the same as coin. 

The basis of charters imposed upon the banks, and 
now impose, obligations which can not be discharged 
without periodically destroying the innumerable inte- 
rests that haverisen upon the foundation of their liabi- 
lities and discounts. A review of the history of com- 
merce since the introduction of hanhs is a continued se- 
ries of speculative expansions and ruin-ous contractions, 
in as much as it is the inherent quality of the charters 



105 

wliicli regulate bank issues that sucli consequences must 
follow. The art of modern statesmanship has been 
employed with remarkable success in sheltering the 
financial blunders of legislation on this subject hj ascri- 
bing the organic defect of the law to the imprudence, 
avarice, and dishonesty of commercial enterprise. The 
victims of legislative error are charged upon each re- 
curring financial catastrophe with the authorship of their 
own misfortunes. Popular ignorance sustains the incul- 
cations of this strange philosophy, and every man who 
is dashed to the earth attributes his ruin to liis own mis- 
adventures, or to his equally ruined and prostrate neigh- 
bor, through whom he may have suffered some imme- 
diate loss. 

Notes issned under the existing law of circulation are 
the representative of gold in Britain, or silver in the 
United States^ France^ Germany^ and Russia. A scarc- 
ity of gold or silver^ therefore^ occasions a scarcity of 
notes. These notes are legal auxiliaries to the precious 
metals widening the area of national and individual in- 
dnstry by affording an amount of accommodation which 
the commodities they represent could not. But they fail 
in the essential quality of money npon the same principle 
that gold and silver fail to fullfil the functions of money. 
These notes do not reptresent the national capital. Gold 
and silver coin represent their ovsai aggregate valne, but 
bear no relative and requisite pi'oportion to the aggregate 
capital of a community. Every addition to capital re- 
quires the ample use of money to keep it in profitable 
employment. 

Limiting the price of gold and silver discourages its 
production — limiting the issue of notes to represent the 
limited product of these commodities, carries forward 
the principle of insufiiciency — for which notes were in- 
troduced to remedy. Bartering all commodities into 
gold and silver obstructs trade and production. It is 
a modification of common barter. Highly civilized com- 
munities suffer loss to an extent indescribable by the em- 
ployment of the two commodities specified for the limit- 
less purposes of commercial exchange. To barter grain 
for gold, iron for gold, wool for gold, copper, lead and tin 
for gold, cattle for gold, houses for gold, ships for gold, 
land for gold, and to decree by statute that no other 

N 



10(] 

conimoditT can cancel taxes, rents, interest, and debt, 
is a tiat against linnian progress. The eftbrta of in- 
dustry are discouraged and limited by the impossibil- 
ity of exchanging into these most scarce products the in- 
computable wealth and property which otherwise would 
tlow from the fountains of science and labor — nniltiply- 
ing indeiinitely by the irrestrainable increase of popu- 
lousness in all nations. 

The ingenuity of the trader in employing notes ^ ex- 
hibited the resources of man to disenthral himself from 
the impediments which arrest his onward destiny. Leg- 
islative interference soon, however, diverted these salu- 
tarv facilities into channels which have rendered them 
ruinous to mercantile enterprise, and destructive of se- 
curity in the pursuits of trade. Wotes should have mul- 
tiplied with the accumulations of capital. Men of the 
greatest probity and substance would have supplied to 
the community an amount of accommodation suitable 
to the wants of trade, and consistent with their safety 
as discounting merchants. 

Limiting bank discounts by statute, also gave a mon- 
opolv to some in the exercise of accommodation, which 
ougl'it to have been a common immunity. It has given 
exceptional advantages to one class over another. It 
has added to the opulence of one class by the impover- 
ishment of a larger cluss. The most useful continue the 
poorest. The richest exercise the most ample and ex- 
clusive accommodation. Trading immunities are thus 
usurped, and the fruits of industry absorbed, by legal 
restrictions which increase the power of the strong in- 
stead of facilitating the etforts of every class of capital- 
ists. Employment has been enlarged, nations have be- 
come more populous, and the rich more numerous, but 
the condition of the multitude is less secure, and their life 
not less miserable by the irregularities of employment, 
and their aggregation in large cities. 

To rendei-^ bank discountages equal to the wants of 
trade, and the notes whicli might be issued secure in 
their current value, a new basis is necessary upon which 
money should be produced. A uniform quantity of la- 
bor producing a determinate quantity of the metals — this 
class of products appears to constitute the most certain 
standard of vcdue. It is also the most easily understood. 



107 

and as raw products the least subject of complication in 
qualities. There are no first, second and third qualities 
of gold and silver — very little in copper, and as nearly 
all countries produce iron^ the quality and standard price 
of that commodity are as definite in each nation as the 
value of gold. 

The legal price of gold in Britain is £46 148. 6d. Tak- 
ing the round numbers. 

Of gold, per pound, troy- - - £46 

Of silver, " 3 

Of copper, per ton, - - > - 100 

Of pig iron, '' - - - - - 5 

Bank notes hearing the inscription and issued to sustain 
this table of current value, would constitute, in the 
hand of the holder, a commercial warrant, the denom- 
inative value of which, being as definite as if he held its 
equivalent in gold or silver. E^o depreciation could, 
by possibility, occur. Adding to the above security 
that state, or public stock, to the entire amount of 
issue granted by charter, be deposited in the public 
treasury, guaranteeing the public against loss, should 
the issuers suspend business — the value of the instrument 
would not be affected, since its redemption would be 
amply provided for. It would thus constitute a title- 
deed, equal to a deed of any property. Mr. Anderson 
in a pamphlet of considerable ability published, in 1849, 
very correctly defines a well secured /i{?^6 as a '^circu- 
lating title deed. 

A change in the value of any one standard jpro- 
ducty or even in two oi three would in no manner disturb 
the definite nature of money. Such an extraordinary 
occurrence could not simultaneously take place, yet the 
provisions made to test and preserve the standard^ place 
the current capacity of the hanfcwarroMts beyond danger. 
Bank notes or warrants based upon full security de- 
posited, and bearing the expression of current value in 
four important products ought to be issued without legal 
limit. Issues should be regulated by the amount which 
the banks could discount, and the amounts discounted 
would depend upon the amount of products to absorb 
money at the definite and determinate prices. Trades- 
men and merchants are the best judges how much money 



108 

they can employ profitably. The security exacted from 
the banks would cause the banks to exact ample secu- 
rity from their customers. But to limit discountages 
when abundant security is tendered and the require- 
ments of business demand their accommodation is un- 
warrantably detrimental to the welfare of a people. 

The right and use of banking privileges cannot be too 
broadly exercised. Inasmuch as large and overgrown 
corporations do not afford those numerous accommoda- 
tions which are the most serviceable to the interests of in- 
dustry. This is manifest from the large increase of busi- 
ness which has recently taken place in the discount banks 
of London. It is the multiplicity of discounts and not the 
largeness of the sums wliich constitute the advantages 
of Banks. The number of tradesmen and merchants, 
with moderate capacity, who have for some years been 
doing a fair business, have employed the accommodation 
afforded by these banks so usefully that the discount 
business ot the Bank of England has for some time de- 
clined though the trade of London has greatly increased. 
In the United States there have been, for several years, 
an annual increase of the number of banks, all of which 
are banks of issue which distribute their discounts with 
great advantage to the rising industry of every dis- 
trict. 

The following specimens of notes which have been 
termed hanh warrants to express their security will 
convey the views which have been here set forth. These 
instruments, it is also implied, would be legal tenders 
in satisfaction of private debt and public revenue. The 
standard thus embracing foiir elements of current value 
would guarrantee the public against all possible in- 
convenience in the events of any of the products 
specified declining. Supposing either gold or silver de- 
clined in price, the copper andiron would sustain the de- 
terminate character of a standard. If gold sunk from four 
pounds sterling per ounce to three pounds, depreciation 
would be estimated by the ^products which had under- 
gone no change. Whenever gold and silver had re- 
alized their lowest point the standard would be adapted 
accordingly, the new prices being inserted. 



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' 109 

There is not a village of a lew thonsand inhabitants hi 
the United States, but have a bank of issue. Small suras 
were at one period discounted generally by the Scotch 
banks. They also made loans for agricultural improve- 
ments covering a series of years hi their redemption. 
Small tradesmen could obtain discounts of sums as low 
as ten or twenty pounds sterling, upon the endorsement 
of one of their own class. This form of security was 
called 'cation,' probably from the word caution. The dis- 
countages of the Scottish banks seem originally to have 
been regulated by little regard to their reserves of gold. 
Directors were men of well-known character. Substan- 
tial in their means and of undoubted security. A due 
consideration of the current price of products, and pru- 
dence in the sums discounted, were evidently the rules 
upon which their banking business was conducted. 

During the suspension of cash payments, the Bank 
of England seems to have been guided by similar prin- 
ciples. One of the directors of the bank when examined 
by a secret committee of the House of Lords said, in re- 
ply to a question, requiring an explanation on what 
principles the directors acted while the law was sus- 
pended, replied — "we invariably advanced accommoda- 
tion according to the security and requirement of the 
commercial house." The guarded and prudent manage- 
ment of the bank were certainly better guarantees 
to the public interests and commerce of the country 
than anything which has been witnessed under legisla- 
tive control. There was, however, great danger in the- 
rule which guided the bank, yet the administration of 
this principle seems to have obviated any of the evils 
which might have resulted. 

Issues based upon the current price of products, and 
discounted to any amount which may be required by 
the community, secure the current value of the notes 
against every possible cause oi dej/recicdion or apprecia- 
tion. Issues based upon estate operate to enlarge the 
market price of such property, and thereby the notes 
represent a value which they themselves may have pro- 
duced, as in the case of the assignats of France. Estate 
under these circumstances represents the value of the 
notes, instead of the notes representing the value of es- 
tate. Laud is not a product of labor and, therefore, cannot 



110 

express its own value. Its value is determined by the 
quantity of value which labor can produce from it. 
Issues based upon a commodity, as gold or silver, fluc- 
tuate with their supply and demand, exciting or arresting 
national industry according to the accidental increase or 
decrease of such in the hands of the issuers. Notes 
thus represent the quantity of a commodity and not the 
value of it. Hence issues based upon current value as 
proposed in this chapter, would represent the current 
quantity and value of every product resulting from the 
labor of a community and entered in the market of com- 
mercial circulation. 



CHAPTER XIII. 

FOREIGN COMMEECE ITS PRINCIPLES DISTINCT FROM DOMES- 
TIG TRADE. INTERNATIONAL STANDARD OF VALUE. 

The interchange of products between nations arises 
from the natural advantages which one country com- 
mands to supply certain wants of another at less cost than 
it can supply the required products itself. It is governed 
by distinct laws and a distinct economy. One nation 
buys commodities from another, and pays them with 
other commodities. Money does not cancel the pur- 
chases on either side. The coins of diflerent nations are 
weighed and assayed, and thus reduced to metal. They 
are used for computing value but in a very limited de- 
gree for the caiicelment of transactions. Foreign com- 
merce is international barter. 

To facilitate exchange, all modern nations have two 
classes of merchants — exporters and importei's. The first 
sell but do not buy — the second buy but do not selL 
The process of exchange is indirect, and, therefore, re- 
quires the intervention of a standard of value^ to make 
the language of commerce intelligible between nations. 
The quantity of gold or silver which express the com- 
modities exchanged is never exchanged — it is merely 
the balances which are transferred. Even these are sel- 
dom necessary, and never to a great amount, compared 
to national wealth, as the cost of bills rises against the 



Ill 

nation wliich claims, and discourages imports, while the 
debtor nation obtaining cheaper bills to settle demands 
are encouraged in exports. 

Tavo laws, therefore, operate to adjust the balances of 
exchange, without the actual exportatior^or employment 
of gold or silver bullion. It is only when the balance 
is important that raetals are required for adjustment, and 
if the metals were left to find their market value under 
such circumstances there would be no difiiculty and 
less bullion required. If hullion rose according to de- 
Tnand^ the hills of exchange would rise in a higher de- 
gree. It is chea23er to transfer a hill than to export gold 
or silver in payment of claim. If the price of gold or 
silver cannot rise under the statutes of each nation, then 
hills of exchange cannot rise over a definite rate. 

Taking freightage, insurance, and incidental expenses 
in transferring one hundred ounces of gold from E^ew 
York to Liverpool, at 8 per cent., then a bill of its value, 
with 8 per cent, added, would be as cheap to the im- 
porter. It would also be much more convenient. When 
he cannot obtain a bill on 'Change at something near 
that value, say 108 or 109 it is cheaper to present the 
notes he holds at the bank counter and demand gold. K 
the drain of gold occasioned a rise in price whatever was 
added to the gold or silver would be added to bills of ex- 
change. Whenever the importers found the rate of ex- 
change ascend to a point which virtually deprived them 
of profit they would suspend importing. Exporters on 
the contrary, the greater the premium tliej could obtain 
on the bill which represented the opposite nation a 
debtor, they could sell cheaper and, therefore'export with 
more spirit. 

During the period that the laws relating to the price 
of gold were suspended in England, the adjustment of 
foreign exchange was aftected upon this principle. The 
balance of trade was permanently against Britain 
throughout the long and critical term, in which she was 
engaged in the French war. The increased expenditure 
made to sustain the military operations of the British 
army on the Continent, and to secure by subsidy the co- 
operation of her allies, compelled the government 
to enter the commercial market and buy up foreign bills. 
As both the agents of the government and the importing 



112 

merchants competed, the rate of exchange must have 
ruled very high. Bills bought by the government were 
forwarded to the commissariat of the army and cashed 
by the Continental merchants who had made purchases 
of British manufactures. The importing merchant, find- 
ing he had to pay so high a rate for his bill would add 
the amount to the articles he imported and exact it 
from the consumer. Exporters on the other hand, could 
frequently sell goods cheaper than they could be manu- 
factured, since they were compensated by the price which 
their bills would command on 'Change. 

In 1800 exports exceeded imports 7 millions sterl- 
ing. In 1803 10 millions. In 1814 20 7nillions sterling. 
In 1815 they amounted to 24 millions sterling. High 
prices in Britain did not interrupt the natural opera- 
tion of foreign exchange in selling at low prices 
to other nations. Every commodity v/ as left to find its 
own value. The higher the value of gold and silver in 
England the lower were the prices at which she could 
sell in the foreign market. The high prices of the pre- 
cious metals added to the extra demand for foreign bills 
and gave encouragelnent to the export trade which en- 
abled the British ministers to command the entire agency 
of gold and silver on the continent. 

To obviate the confusion incident to various coins cur- 
rent in dift'erent nations a universal standai'd of value 
might be introduced without changing either the habits 
or language employed by the respective merchants. 

The British pound sterling is 123 grains of gold. 
The dollar of America is 412| grains of silver. 

The Franc of France is 72 grains of silver. 

These standards are necessarily fixed in the opera- 
tions of domestic trade where they rule, and where 
such an immense interest depends upon their inviolabi- 
lity. There being no commercial debts between nations 
except what arises from the consideration of distance or 
accommodation, neither are there any permanent liabili- 
ties. The institution of a universal standard appears ad- 
visable. The livre of France is not well adapted, it is too 
reduced. The dollar of the United States is better, as it 
contains a greater degree of value. The pound of Britain 



113 

is of large denomination, and ill adapted from its con- 
ventionality. Simplicity in commercial calculation is 
of high importance. Prospectively estimating the in- 
crease of commerce between nations, it is probable that 
a standard of unity, and of considerable value should 
prevail. 

Let us take 100 grains of gold as the mercantile stan- 
dard of all nations. 

For Britain divided as follows : 

10 tenths - - 1 penny, 

10 pennies - - 1 shilling, 

10 bhillings - - 1 pound mercantile, 

Por the United States : 

10 tenths - - 1 cent, 

10 cents - - - 1 dime, 

10 dimes - - 1 dollar mercantile. 

For France : 

10 tenths - - 1 centime, 

10 centimes - - 1 franc, 

10 francs - - 1 livre mercantile. 

The minute fraction of the mercantile pounds dollar 
and livre would be the tenth part of one grain of gold, 
or equivalent to one and a-half grains of silver. The 
mill or thousandth of the United States is about one- 
half grain, and \hQ farthing of Britain about 2 grains of 
silver. For commercial computation the fraction of the 
mercantile standard would, there can be little doubt, 
sufficiently perform all transactions of buying, selling 
and estimating the most minute values. This standard 
might become the universal language of the merchants 
of all nations. Instead of translating the coins of other 
countries into the coins of each respective country, 
the merchants would merely translate the universal 
standard into the peculiar language of his own people. 
The value of the mercantile standard would rise or fall 
according to the rate of exchange — such would only 
be th6 business of the merchant to understand. On 
the contrary the standard of domestic value would re- 
main fixed and determinate. 
o 



114 

Gold and silver when used for domestic exchange are 
reqiiired^ in actual quantities to be exchanged into the 
commodities transferred Ihese metals as they appreciate 
or depreciate, wrong the debtor or creditor. With 
the merchant they appreciate or depreciate without in- 
cuning loss, for thougli he buys and sells by a metallic 
measure he pays his debts in produce or bills, or when 
he does pay in gold, he has previously been compen- 
sated by the rate <»f exchange. He cannot therefore be 
wronged. Xations can measure domestic value in notes 
because the value of these notes can be regulated and 
understood between the citizens. Between nations, 
these notes, having no value in themselves, and their 
exchangeable value being only current in the country 
which issues them, they cannot be used for interna- 
tional exchange, and it is this superiority in noteSj 
which enables a nation to pursue its domestic indus- 
try uninterrupted by the balance of foreign trade. It 
is, however, important that the merchants of each 
nation should have a fixed measure to estimate and 
enable others to estimate the values which are to be 
exchanged. 

The two great departments of national exchange, home 
and foreign, operating in harmony with the extension of 
domestic production, would extend foreign trade in a 
legitimate and beneficial ratio with national progress. 
Foreign commerce properly separated from the domes- 
tic would maintain a power of rectification in the inter- 
exchanges with other nations, which cannot exist while 
the measure of value in the two great divisions of trade 
is of the same character. The accumulation of liabilities 
is a social institution which does not belong to commerce. 
Conventional money is therefore a measure of liability as 
well as a measure of value, and the permanent and 
multiplying liabilities between the citizens of a common- 
wealth render any alteration of the value of money a 
source of incalculable wrong and misery. Commercially 
gold may fluctuate, and permanently rise or sink in 
value — neither the merchant or the nation would be in- 
jured by the result. Bullion might rise in current value 
by a large exportation, but the demand of some com- 
moidities must previously have increased, and occasioned 
large imports. The importer would, therefore, have 



115 

ample compensation for the advanced price he paid either 
tor bullion or bills 

Gold is, however, seldom exported for commercial 
purposes, except in the event of an extensive failure of 
the crops. It then ought to rise in value to every do- 
mestic product. It should only operate upon consump- 
tion, instead of, as now, operating specially upon pro- 
duction by curtailing discounts correlatively with the 
rise of the necessaries of life. Under the present laws 
of commerce bread may rise while no increase of price 
will take place upon articles of luxury. The price of 
imports generally should rise in some degree so that the 
cost of luxuries would equally sustain the effects on ac- 
count of the adverse state of exchange. The rich would 
thus in some measure have to diminish the consumption 
of foreign luxuries because of the costliness of the ne- 
cessaries consumed by the community. Under such 
circumstances the nation who claims the balance would 
seize upon the the temporary cheapness of bills, and 
make larger demands. The export of bullion would, 
by this new impulse, be proportionately limited. 

In the event of war it is essential that a state should 
have a pro23er command over the precious metals. But 
to enforce a medium of exchans^e of ffold and silver dur- 
mg peace, to retain a provisional supjDly against the ex- 
igency of war materially diminishes the command dur- 
ing war, as such a medium restrains both the circulation 
and production of wealth. A community is therefore 
less rich in these commodities which can at all times 
command gold and silver in exchange. During war the 
price of gold rises with the demand for it. This rise 
makes goods comparatively cheaper than those of other 
nations. In other words the internal riches of a common- 
wealth would enable a state to raise larger revenues 
than less wealthy nations and the sacriiice to obtain gold 
would be made with less difficultv. 

If a state wants gold to sustain its armies, its agents 
can go into the commercial market and buy up the bills 
due by the nation most convenient to the seat of war, 
as in the instance previously cited. The price of bills 
are raised, and a large profit is obtained by the exporter, 
who offers goods at proportionably lower prices to, the 
foreigner, when he knows he can get a good price for the 



11^ 

bills he obtains in exchange. In proportion as the "bills 
rise, he can afford to sell goods for less. Competition 
also steps in to share the advantages^ and reduces prices 
to the remunerating standard. Products may thus be 
sold to other nations for less than the cost of productiouy 
while the merchant and producer realise their usual 
profits. By this process the loss necessarily incurred to 
command gold from the foreigner is indirectly paid by 
the nation. The state becoming a competitor in the 
market for foreign bills, the importing merchant has to 
pay an advanced price to liquidate his foreign debts. 
The price of foreign products rise proportionately, so that 
the consumer has to pay higher prices, and this indirectly 
compensates the exporter and manufacturer for the low 
price he sells products to the foreigner. The command 
of gold is therefore regulated by the resources of com- 
Tnerce and the industry of a people. Foreign trade under 
any circumstances, when left to the operation of the 
natural laws of value, adjusts the balance of exchange 
with the utmost order and precision. 

Loans are seldom made between nations in money, '^or 
are investments in foreign projects made in money. 
When a loan is made to a foreign government by a 
financier in London, he proceeds to buy up the hills of 
exchange due by the merchants of the borrowing state. 
The terms of his bargain enable him to give a good 
price for the bills. The importing merchant abridges- 
his orders for the products of such a country, since he 
has so much difficulty to procure hills for the settlement 
of his liabilities, and the more especially is he discour- 
aged in making further purchases as the hills have risen 
in price whilst his stock remains at the same market 
value. 

The exporting merchant, on the contrary, can sell his 
bills promptly and at higher prices. He urges his cor- 
respondents to increase their orders, and exports with 
greater spirit. A loan to a foreign state by a large 
financier is merely an order given to his 'correspondents 
to collect a commercial debt from its own people. 
Investments in all public enterprises are made in the 
same manner. Imports are aiTcsted and exports are 
stimulated during tlie transfer of the order. If the 
terms of the loan are to be executed within a period so 



117 

circumscribed that hills cannot be multiplied as ra- 
pidly as may be required, then the balance is forwarded 
in specie. Whenever the loan is consummated, exchange 
resumes its ordinary equability. Investment in the do- 
mestic enterprises of a foreign nation is a civil contract. 
The transfer of dividends are, however, subject to the 
rate of exchange. It is certainly a matter of weighty 
concern with all nations to execute their great works 
without foreign aid or incumbrance. Rising colonies 
may profit by such advances, but independent commu- 
nities resorting to those methods of finance subject 
their industry to impediments which a judicious course 
of policy might greatly obviate. 

The ministers of foreign governments have found of 
late, that lenders really did not send specie in ful- 
filment of their loans, and that the amount being collected 
from their ow^n people paralyzed their own commerce. 
The little treasuries of the merchants w^ere emptied into 
the state treasury instead of being transferred to other 
merchants in the regular course of trade. Recently, 
state contracts have therefore provided that one-half, 
or more or less, should be paid in actual transfer of 
specie. If foreign princes really wished to increase cir- 
culation as well as meet the exigencies of deficient rev- 
enue, were to contract their loans in several limited 
sums by first stimulating exports, each sum to be trans- 
ferred upon the closing of negociations they might render 
great service to the industry of their people, and there- 
by increase the internal sources of public revenue. As, 
however, those who make loans operate throngh nations 
commercially the most powerful, their influence over the 
balances of exchange is frequently paramount, even to 
commerce itself, or to the most skilful policy of a state. 

CONCLUSION. 

The principles urged throughout this work profoundly 
interest all men, and the more especially in an age 
when organic laws become essential to the conserva- 
tion of order and progress. Society contracts a lia- 
bility with every member wliich it calls into life. 
The multitude in all civilized communities, who are 
without possession, are the most dangerous to tl^e 



lis 

safety of the state. Whether there is a demand for 
their" labor or otherwise, it must provide for their 
wants. To the wisdom of the state, therefore, apper- 
tains the responsibility of rendering them subservient 
to the general interest by removing the incidental 
obstructions which arrest enterprise and employment. 
If populousness does not add to the strength of a 
commonwealth it will contribute to its weakness. 
Full of aspiration and of urgent necessities — man be- 
comes a tax on the resources of society, or an enemy to 
its authority when it does not execute the incontestible 
claims of his nature. The injunction is mutual and in- 
capable of revocation — the state demands obedience, the 
subject demands the right to employ his faculties without 
the obstruction of inequitable laws. Otherwise compacts 
become conspiracies and force substitutes justice. 
Neither does success or opulence compensate for equity, 
since all men are exposed to misfortune, and require the 
inviolable guarantee and provision of industrial right to 
mitigate the calamities of human adversity. 



47 75 iii "I 



EEKATA. 

Page 13, line S9, read "progress of art" for " progress art." 
" 43, line 35, reud " thirty millions" for " twenty millions.^'" 
" 63, lines 18 and 19, read "eight and six millions" for " teia 
and eight." 

Page 111, line 35, read ^^ with Britain" for " against,'^ 



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